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Stadion Tactical Defensive Fund Commentary May 2017

During the month of May, U.S. stocks rose to record highs on record low volatility. The technology heavy NASDAQ Composite gained 2.50% with the S&P 500 adding 1.41%. Much of the market’s gains can be attributed to the “FANG” stocks (Facebook, Amazon, Netflix, and Alphabet, the parent of Google). 

The CBOE Volatility Index (VIX) broke 10 for the 13th time since 1990 as equities set record highs. Low levels of volatility are a sign there is very little fear or skepticism among investors. The VIX posted an average close of 10.86 in May—its second lowest monthly average in history. 

As we have seen many times since the election, the market has decided to ignore what could have been destabilizing events: a less accommodative Federal Reserve, a bombing in the United Kingdom, a downgrade in the debt of China, and continued distractions in the Trump administration. In the past, any one of these events could have caused the market to fall, but instead, equity prices powered ahead. 

The minutes from the May Federal Open Market Committee meeting indicated that it would “soon be appropriate” to raise short term interest rates. Most analysts anticipate two more rate hikes in 2017, one in June followed by another in December. The Fed also recognized the need to begin shrinking its $4.5B balance sheet. It’s anticipated the strategy will likely slowly reduce the balance sheet of securities by allowing a small number of assets to mature every month without reinvesting the proceeds.    

The most recent U.S. job report showed the unemployment rate dropping to 4.4%, near a 10-year low.  Nonfarm payrolls surged adding 211,000 jobs. The tightening labor market affirms the case for an interest rate increase at the June Federal Open Market Committee meeting.

The Fed’s preferred measure of inflation, the core Personal Consumption Expenditures (PCE) index, slipped to its worst level since December 2015 on a year over year basis—nearly half a point below the FOMC’s publicly stated target. Despite the weaker recent inflation reports, Fed officials anticipate further increases in inflation citing the tightening labor market and a growing U.S. economy. The Federal Reserve Bank of Atlanta’s GDPNow model is predicting GDP growth of 3.8% in the second quarter of 2017—up from the first quarter’s 1.2% growth rate.

Over this period, the Stadion Tactical Defensive Fund performed in-line with its Morningstar category but underperformed the S&P 500. The underperformance was attributed to the Fund’s overweight to small and mid-cap stocks compared to the S&P 500. 

The Fund seeks to combine two elements of trend following. One of which focuses on longer term cyclical trends (the core portfolio) and another which seeks to balance safety and return among shorter to intermediate trends (the satellite portfolio).

Both the core and satellite portions of the Stadion Tactical Defensive Fund entered the month fully invested in broadly diversified U.S. equity ETFs with a small position in a currency hedged international equity ETF. There were no changes in the satellite or core portion of the strategy for the month. 

To view the most recent performance for the Stadion Tactical Defensive Fund, click here.


Performance data quoted represent past performance. Past performance is no guarantee of future results. Investments are subject to risk, and any of Stadion’s investment strategies may lose money. Stadion’s actively managed portfolios may underperform in bull markets. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance data may be lower or higher than the performance data quoted. To review our most recent monthly performance, please visit www.stadionfunds.com.

An investor should consider the investment objectives, risks, and charges and expenses of the Stadion Funds carefully before investing. The prospectus contains this and other information about the Funds. A copy of the prospectus is available by calling Stadion Funds directly at (866) 383-7636 or Stadion Money Management, LLC, the investment advisor, at (800) 222-7636. The prospectus should be read carefully before investing.

The index shown is defined as follows.

The S&P 500 Index is an unmanaged index considered representative of the U.S. stock market.

The NASDAQ Composite is a stock market index of the common stocks and similar securities listed on the NASDAQ stock market and it is highly followed in the U.S. as an indicator of the performance of stocks of technology companies and growth companies.

Personal consumption expenditures (PCE), or the PCE Index, measure price changes of consumer goods and services.

The VIX Index measures annualized implied volatility as conveyed by S&P 500 stock index option prices and is quoted in percentage points per annum.

One cannot invest directly in an index. All Benchmarks composite data supplied by third party vendors, assumes re-investment of all dividends.

Diversification does not eliminate the risk of experiencing investment losses.

*Performance numbers as of May 31, 2017

Risks

There are additional costs and potential risks associated with investing in domestic and international Exchange-Traded Funds (“ETF’s”). Investment in the Fund is subject to investment risks, including, without limitation, market risk, management style risk, risks related to “fund of funds” structure, sector risk, fixed income risk, tracking risk, risks related to ETF net asset value and market price, foreign securities risk, risks related to portfolio turnover and small capitalization companies risk. Since each Stadion Fund is a “fund of funds,” an investor will indirectly bear fees and expenses charged by the underlying ETFs and investment companies in which a Stadion Fund invests in addition to a Stadion Fund’s direct fees and expenses. More information about these risks and other risks can be found in the Fund’s prospectus.

There are risks associated with the potential investment of the Tactical Defensive Fund’s assets in fixed income investments, which include credit risk, interest rate risk, and maturity risk. Investment objective: Seek capital appreciation.

The Fund’s foreign investments generally carry more risks than funds that invest strictly in U.S. assets, including currency risk, geographic risk, and emerging market risk. Risks can also result from varying stages of economic and political development; differing regulatory environments trading days, and accounting standards; and higher transaction costs of non-U.S. markets.

The Stadion Funds are distributed by ALPS Distributors, Inc.                                                                                         

An investor should consider the investment objectives, risks, and charges and expenses of the Stadion Funds carefully before investing. The prospectus contains this and other information about the Funds. A copy of the prospectus is available by calling Stadion Funds directly at (866) 383-7636 or Stadion Money Management, LLC., the investment advisor, at (800) 222-7636. The prospectus should be read carefully before investing.

The Stadion Funds are distributed by ALPS Distributors, Inc. An investment in the Funds involves risk, including loss of principal.