The major stock market indexes finished substantially higher last week. The Dow Jones Industrial Average gained 12.7 %, the S&P 500 Index rose 12.1 %, the NASDAQ Composite rallied 10.6%, and the Russell 2000 small-capitalization index bested all of the other indexes with an 18.5% gain. The 10-year Treasury bond yield rose 12 basis points, sending Treasury bonds generally lower. Last week, spot gold closed higher at $1,683.63, up $62.92 per ounce, or 3.9 %. As you can see from the previous graph, the S&P 500 remains below the downward-sloping 50- and 200-day moving averages. The 50-day average has moved below the 200-day average to form the classic “death cross.” These are all indicative of a bear market. However, in line with my weekly commentary, there are a couple of rays of sunshine in the chart. First, the prices have formed a “W” as they have dropped to a low, bounced higher, sank to a higher low, and then rallied. We often see this pattern at market bottoms. Still, despite the rally, we remain more than 4% below the 50-day average and 7.5% lower than the 200-day version. Second, the rally from the March 23 low has now exceeded 20%. Technically, that means we have shifted back to a bull market. The 30%-plus fall to the March low took just 23 days, slightly more than half the time of the next fastest move to a “bear” classification in market history. The recent 20%-plus rally from the March 23 low (more than the prerequisite 20% needed to shift to a bull market) took just 12 days, marking the third-fastest return to bull market status in history. However, fast recoveries don’t always lead to short-term market gains. As the following chart of the 10 fastest bull market recoveries illustrates, in most cases, the market following these recoveries was flat to down. On only two occasions (both in the 1930s) did stocks rally by more than 20% again over the next three months. The quick moves from bear to bull market territory are a testament to the high-volatility environment that we have been living through lately. In fact, the only time the 25-day average of daily price moves has been as great as it is now was during the stock market crash of 1929—over 90 years ago. Market volatility can be both good and bad. High and rising volatility normally accompanies a declining market, while high and falling volatility, like we have seen in the last two weeks, often brings a rally. Here I am talking about stock market volatility , as opposed to the composite (gold , bond , and stocks) volatility measure I discuss at the end of this newsletter. The market’s recent resurgence, as I said earlier, is the result of hopeful signs that the COVID-19 virus is receding. One way to demonstrate this, without using the standard charts showing the numbers of cases and deaths, comes from our friends at Bespoke Investment Group. They charted the number of web searches for the various symptoms of the virus over the last 90 days. Here’s what they found: As we see in the graph, these searches seem to top out by March 26. They have been on a downward track ever since. If this should continue without flare-ups, investors will likely remain optimistic for a quicker restart to the economy. The volatility in stocks has driven the prices of two safe havens—government bonds and gold—higher. With all of the Fed easing, we have seen 7–10 year Treasury bonds gain almost 10% year to date. Although bonds gave up some of their gains last week as yields rallied, gold rallied to its highest price since 2012. Gains this year are a little more than 8%. Although both of these assets have performed similarly this year, they do provide different types of protection for your portfolio. Bonds benefit when the Federal Reserve steps in to ease monetary conditions. With its trillions of dollars of new support, that is certainly the case right now. Gold, on the other hand, provides a physical asset that has traditionally given comfort to investors in times of uncertainty like the present. And while bonds tend to lose value during inflationary times, gold has historically been a store of value, shielding investors from the ravages of inflation. All of the help from the Fed and rescue operations of the president and Congress are a double-edged sword, as inflation could easily follow in their wake. Two of our All-Terrain Strategies—Trivantage-Unleveraged for Balanced risk-profile investors, and Trivantage-Leveraged for Aggressive risk-profile clients—move solely between bonds, stocks, and gold. They both are currently invested solely in gold and bonds. Despite the exclusive exposure to these safe-haven asset classes, both strategies posted gains last week even in the face of the historic rally in equities. Unlike the S&P 500, which is down over the last 12-month period, both strategies are also still posting positive returns (after maximum fees) for that period through April 9. See the performance and holdings of both strategies under the All-Terrain category of our Solution Selector, available post-login on our website. While earnings season is just beginning and there has been little to report, economic reports keep coming in. Rather than dwell on one depressing report after another, I thought I would show two that come from my home state of Michigan. These are representative of what we are seeing and will continue to see for some time to come. Both auto sales (long the lifeblood of Michigan’s economy) and, my law school alma mater, the University of Michigan’s index of consumer confidence have fallen to levels not seen since the last recession. Some of the more encouraging signs for stocks continue to be investor sentiment that remains low (and contrarily positive) and overwhelmingly positive numbers for advancing issues and advancing volume on days when stocks have gained ground. We have had several days during the recent rally when these numbers have exceeded 90%. This is called a “bullish thrust.” While performance can be mixed in the short run, in the long run, they have almost always yielded positive returns over the next three, six, and 12 months. Last week we registered the fourth bullish thrust in advancing volume since the March 23 bottom. This has happened only rarely but has tended to bring on higher prices in the future. In contrast, market seasonality (as expressed in our Political Seasonality Index—PSI, available post-login in our Solution Selector under the Domestic Tactical Equity category), which has been positive for most of the rally days since the March 23 low point, is turning bearish. The PSI is pointing lower from April 16 to April 29, as it begins a period that is usually soft for most market days until the Memorial Day holiday. Our intermediate-term tactical strategies are mixed: The Volatility Adjusted NASDAQ (VAN) strategy remains 50% in inverse funds, Classic has moved into a fully invested position, and our Self-adjusting Trend Following (STF) strategy is 80% invested. VAN and STF both employ leverage—hence the investment positions can be more than 100%. Short-term indicators uniformly remain positive, although our QFC S&P Pattern Recognition strategy’s equity exposure continues at 0%. Among the Flexible Plan Market Regime indicators , our Growth and Inflation measure still shows that we are in a Normal economic environment (meaning a positive inflation rate and positive GDP), but the GDP position may change shortly. Our Volatility composite (gold, bond, and stock market) is still showing a High and Rising reading, which favors stocks and then gold over bonds. Although all have positive returns in this regime stage, this is the riskiest volatility regime for stocks and bonds and the second riskiest for gold. That certainly has been the case.