As Market Trends Reverse, Choices Loom

May 15, 2015

 

two_lc_vs_sc

For a larger view, please click on the image above.

 

two_lc_vs_sc

For a larger view, please click on the image above.

 

 

Dollar Outlook

Another factor that was contributing to large-cap underperformance has been the quick strengthening we saw in the dollar, particularly in early March.

 

Since many large-cap constituents are multinational corporations deriving decent revenue from non-U.S. sources, the strong dollar was a drag on these companies. As a comparison, small-cap companies generally derive more revenue within the U.S., so they are not vulnerable to these currency-translation issues.

 

As we’ve seen the dollar weaken since mid-April, large-cap relative performance has improved. However, rather than being a stabilizer, this increased currency effect could add volatility to any relative performance going forward as currency markets decide which way to trade.

 

Conclusion

Some of the market trends we saw from early this year have reversed course. However, it is yet to be determined if these reversals are the start of a new trend or just a short-term correction.

 

 

The above constitutes the personal, professional opinion of Clayton Fresk, CFA, and does not reflect the views of Stadion Money Management LLC. At the time this article was written, Stadion held long positions in IEF. References to specific securities or market indexes are not intended as specific investment advice.


Founded in 1993, Stadion Money Management is a privately owned money management firm based near Athens, Georgia. Via its unique approach and suite of nontraditional strategies with a defensive bias, Stadion seeks to help investors—through advisors or retirement plans—protect and grow their “serious money.” Contact Stadion at 800-222-7636 or www.stadionmoney.com.

 

 

 

Find your next ETF

Reset All