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One Year Later

It’s now been just over a year from that chilling day in March 2020 when the Dow Jones Industrial Average dropped nearly 13% while the S&P 500 simultaneously fell 12%. The pandemic had only just been declared as such and we were in our first week of lockdowns and mandatory social distancing. While this historic one-day drop, occurring in a market that still would not arrive at its bottom for another week, certainly kept analysts’ eyes on the screen the fact is that most folks remained less worried about the stock market than they did about the rapid and widespread shuttering of thousands of businesses.

Will McGough

By Will McGough on March 26, 2021



It’s now been just over a year from that chilling day in March 2020 when the Dow Jones Industrial Average dropped nearly 13% while the S&P 500 simultaneously fell 12%. The pandemic had only just been declared as such and we were in our first week of lockdowns and mandatory social distancing. While this historic one-day drop, occurring in a market that still would not arrive at its bottom for another week, certainly kept analysts’ eyes on the screen the fact is that most folks remained less worried about the stock market than they did about the rapid and widespread shuttering of thousands of businesses.
 
People rationally deduced that the wolf at the door was of far more immediate concern than the market. Investors of a certain age had witnessed at least two of three major stock market reversals in the past 34 years (i.e. the crash of 1987, the tech bubble bursting between 2000-2002, and the global financial crisis of 2008/9).  Even so, this investor behavior during this time will likely be studied for years.
 
Although there is no backstop for market losses the Federal Government, in a decisive and quick manner, got involved.  Some of their programs included eased ability for people to extract cash from 401(k) savings, two rounds of direct stimulus to most citizens, massive expansions of unemployment insurance, moratoriums on student loans and evictions, and billions in support for businesses both large and small. All of which is to say, that the market crisis of 2020 has a markedly different face than previous ones in nearly every way.
 
As we enter an era of hopeful economic recovery investors may find growth in market dynamics they have not been necessarily looking at. Tom Lee, Managing Partner and the Head of Research at Fundstrat Global Advisors, feels that growth may be found in cyclical stocks, i.e., investments that were pressed down during crisis but poised to rebound with the economy. “After any war, cyclical companies become growth companies as economies are rebuilt. This is why cyclicals, in our view, are taking leadership,” said Lee.1
 
With all the Federal Reserve and Treasury money sloshing around, and a post “war” economic re-building underway, new paradigms are in play.  Some asset classes, thematic groups of equities, and stocks are now front and center in the news.  Dynamics are always shifting, and it may feel like they are shifting away from you.  This is why we believe in comprehensive asset allocation. Small stocks can and often do become large stocks over time and international stocks may be poised to lead once again (after they lead the 2003-2007 ‘bull’ market).  And, for only the 11th time this century (since 2000 that is), the Bloomberg Barclays US Aggregate Bond Index saw a peak to trough 3% drawdown or more.
 
Asset allocation diversification should be in play for taxable accounts as well as IRA, 401k and other retirement accounts. For retirement plans, we believe Plan Sponsors and their advisors, with the rise of technology, should consider alternatives to the  antiquated age-only model of Target Date Funds.  More data is now available to incorporate which could lead to better outcomes for plan participants.  In many years, hopefully we will look back and see all of the great technological innovations of 2020 but also wonder why it took a pandemic to accelerate them!

Will McGough

Author: Will McGough

Chief Investment Officer of Retirement Will McGough joined Stadion Money Management in 2003 and currently serves as Chief Investment Officer of Stadion’s Retirement investment strategies which comprises oversight of Stadion’s risk-based, target date, and managed account strategies. He is a member of the Investment Committee and Senior Management team, and serves as as Stadion’s Chief Investment Officer, Retirement. He provides thought leadership for Stadion’s participant level, customized retirement solutions, in order to ensure that its glide path technology and asset allocation are able to support all intermediaries in the defined contribution ecosystem. Will received his BBA in Finance from the University of Georgia and also holds the Chartered Financial Analyst designation. Will is a member of the CFA Institute, the CFA Society of Atlanta, the American Association of Professional Technical Analysts, National Association of Active Investment Managers, the UGA Alumni Association and National Eagle Scout Association.

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Will McGough
Written By:

Will McGough

Chief Investment Officer of Retirement Will McGough joined Stadion Money Management in 2003 and currently serves as Chief Investment Officer of Stadion’s Retirement investment strategies which comprises oversight of Stadion’s risk-based, target date, and managed account strategies. He is a member of the Investment Committee and Senior Management team, and serves as as Stadion’s Chief Investment Officer, Retirement. He provides thought leadership for Stadion’s participant level, customized retirement solutions, in order to ensure that its glide path technology and asset allocation are able to support all intermediaries in the defined contribution ecosystem. Will received his BBA in Finance from the University of Georgia and also holds the Chartered Financial Analyst designation. Will is a member of the CFA Institute, the CFA Society of Atlanta, the American Association of Professional Technical Analysts, National Association of Active Investment Managers, the UGA Alumni Association and National Eagle Scout Association.


1https://markets.businessinsider.com/news/stocks/stock-market-outlook-growth-buy-cyclicals-travel-post-pandemic-stimulus-2021-3-1030170438 Published March 10, 2021; Accessed March 24, 2021
 
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange.
The S&P 500 Index is the Standard & Poor’s Composite Index of 500 stocks and is a widely recognized, unmanaged index of common stock prices
 
The Bloomberg Barclays US Aggregate Bond Index is a broad-base, market capitalization-weighted bond market index representing intermediate term investment grade bonds traded in the United States.
 
There is no guarantee of the future performance of any Stadion account. Material has been derived from sources considered to be reliable, but the accuracy and completeness cannot be guaranteed. Results based on available universe of Target Date Fund Series, which includes registered mutual funds, and non-registered collective investment funds and insurance accounts. Collective investment funds and insurance accounts are only available for investment to qualified retirement plan assets such as 401(k) plans.
 
The commentary, analysis and opinions expressed are those of Stadion’s Investment Team. The commentary, analysis and opinions referenced are as of the date of publication and are subject to change without notice. This material is for informational purposes only and should not be considered investment advice. This is not a recommendation to buy or sell a particular security. The investment strategy or strategies discussed may not be suitable for all investors.
 
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. Nothing contained in this document may be relied upon as a guarantee, promise, assurance, or representation as to the future.
 
Diversification does not eliminate the risk of experiencing investment losses.
 
Stadion Money Management, LLC (“Stadion”) is a registered investment adviser under the Investment Advisers Act of 1940.  Registration does not imply a certain level of skill or training. More information about Stadion, including fees, can be found in Stadion’s ADV Part 2, which is available free of charge.
 
The opinions expressed herein are those of Stadion Money Management and are subject to change without notice. Past performance is no guarantee of future results. Investments are subject to risk, and any of Stadion’s investment strategies may lose value.
 
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