Given the current situation, and the plethora of information that has already been broadcast and published about the Coronavirus and its impact on the markets, we wanted to bring in Stadion’s Chief Investment Officer Brad Thompson to share his insights on recent market activity.
By Brad Thompson on April 6, 2020
As we all know stocks hit an all-time high around February 19th, but since then the markets across the globe have been in turmoil. Stocks have declined into official bear market territory and bond markets, especially corporate bond and high yield markets, have experienced major dislocations. Anyone who has reached for yield in recent years has been hurt badly by these movements. Fortunately, the Federal Reserve acted quickly, and in a very big way, to help keep financial markets liquid and functioning very well. The U.S. central bank has essentially established an unlimited form of Quantitative Easing (QE) crafted to allow the Fed to do everything in its power to support financial markets.
This is not the first time, nor will it be the last, that financial markets have suffered bear market declines. Over the years we have experienced a bear market in US stocks on average every 4.5 to 5 years. Average time-to-recovery has been 42 months, and we expect another full recovery this time. The 11-year bull market run that ended in February of this year was one of the longest bull market runs we have had in the history of U.S. stock market cycles.
We feel the most important thing is for you to be invested in an allocation that matches your unique risk tolerance. By having your asset allocation properly matched to your natural risk tolerance you’re better prepared to navigate times like this with greater comfort. If you are a young investor, this type of market correction will look like a blip on the screen over your long-term investment horizon. If you are closer to retirement, though, it is important for you have some risk mitigation assets and strategies built into your allocation to properly match your time horizon and mitigate the sequence of returns risk associated with typical market cycles. We strongly believe that customizing your asset allocation to your unique circumstances is the best way to approach your long-term investment goals.
We have been here before and have managed through multiple market cycles, and each time stocks have recovered and reached new highs. As an example, on March 9th of this year we crossed the 11-year anniversary of the bull market that started on March 9th, 2009. If you had remained invested in the S&P 500 and were still invested on that day in 2009 your retirement investment would still be up 366.89% on a total return basis despite the market declines we have recently experienced. For investors with many years until retirement, ten, twenty or even thirty years from now this market correction will look like a bump in the road on a long-term market chart just like the many bumps we have traveled over the years. On March 9th, 2009 no one knew if the preceding bear market was over or not. No one rings a bell and says the bear market is over. That is why we feel it is very important to consistently follow your investment process.
Author: Brad ThompsonBrad Thompson joined Stadion in 2006, bringing 20+ years of financial analysis, investment management, and fund management experience with him to Stadion, where he manages the Stadion Portfolio Management team. Prior to joining Stadion, Brad served as the Chief Investment Officer and Chief Financial Analyst for Global Capital Advisors. Brad has a Bachelor of Business Administration Degree in Finance from the University of Georgia, and also holds the Chartered Financial Analyst designation. Brad is a member of the CFA Institute and the Bermuda Society of Financial Analysts and also holds the Chartered Retirement Plan Specialist Designation. Brad has served on the board of the Executive Leadership Council for the American Cancer Society and on the Board of Trustees for the University of Georgia Terry College of Business Student Managed Investment Fund. Brad enjoys watching UGA football and spending time with his family.
A bear market is a condition in which securities prices fall and widespread pessimism causes the stock market’s downward spiral to be self-sustaining. Investors anticipate losses as pessimism and selling increases. Stadion defines a bear market as a time when market indices fall at least 20%.
A bull market is a period of several months or years during which asset prices consistently rise. It is the opposite of a bear market, in which securities prices consistently fall. Stadion defines a bull market as a time when the market indices rise at least 20%.
Quantitative easing is a monetary policy in which a central bank purchases government securities or other securities from the market in order to increase the money supply and encourage lending and investment.
There are certain limitations to technical analysis research, such as the calculation results being impacted by changes in security price during periods of market volatility. Technical measurements are one of many indicators that may be used to analyze market data for investing purposes and should not be considered a guaranteed prediction of market activity.
The Reports’ commentary, analysis, opinions, advice, and recommendations represent those of Stadion Money Management and are subject to change at any time without notice. The opinions referenced are as of the date of publication and are subject to change to due changes in the market or economic conditions and may not necessarily come to pass Stadion reserves the right to modify its current investment strategies based on changing market dynamics or client needs.
This document may contain certain information that constitutes “forward-looking statements” which can be identified by the use of forward-looking terminology such as “may,” “expect,” “will,” “hope,” “forecast,” “intend,” “target,” “believe,” and/or comparable terminology. No assurance, representation, or warranty is made by any person that any of Stadion’s assumptions, expectations, objectives, and/or goals will be achieved. There is no guarantee of the future performance of any Stadion portfolio. This material is for information use only and should not be considered financial advice. The data presented has been gathered from sources believed to be reliable; however, their accuracy, completeness, or reliability cannot be guaranteed. We make no warranties and bear no liability for your use of this information.
The S&P 500 Index is the Standard & Poor’s Composite Index and is widely regarded as a single gauge of large cap U.S. equities. It is market cap weighted and includes 500 leading companies, capturing approximately 80% coverage of available market capitalization. The volatility (beta) of an account may be greater or less than its respective benchmark. It is not possible to invest directly in an index.
Diversification does not eliminate the risk of experiencing investment losses.
Past Performance is no guarantee of future results. Investments are subject to risk, and any of Stadion’s investment strategies may lose money.