Market insights and analysis

How dynamic, risk-managed investment solutions are performing in the current market environment

3rd Quarter | 2021

Market insights and analysis


Updates on how dynamic, risk-managed investment solutions are performing in the current market environment.

By Tim Hanna

The major indexes posted mixed performance last week. The S&P 500 gained 1.25%, the Dow Jones Industrial Average rose 2.29%, the NASDAQ lost 1.08%, and the Russell 2000 small-capitalization index gained 3.57%. The 10-year Treasury bond yield fell 1 basis point to 0.63% as Treasury bonds rose slightly for the week. Last week, spot gold closed at $1,810, up 0.65%. Optimism about the coronavirus vaccine and positive economic data were the primary drivers behind investors’ short-term decision-making last week.


We’re about six months into the “pandemic stock market,” one month into summer, and a week into earnings season. Bespoke Investment Group published an interesting piece related to seasonality, specifically the “summer doldrums,” focusing on the S&P 500’s next-week, one-month, and three-month returns. Since 1980, the average performance has peaked on July 17 and moved sideways for the next three months. Bespoke adds,

“The first image below is from our Stock Seasonality tool, and it shows the median historical performance of SPY (S&P 500 tracking ETF) during the upcoming week, month, and three months over the last ten years. Over the upcoming week, SPY's median performance has been a gain of 0.04% which ranks in the 37th percentile relative to all other one-week periods. A gain of 0.04% is nothing to get terribly excited about, but compared to SPY's median returns over the upcoming month and three months, 0.04% looks great. Over the last ten years, SPY's median performance from the close on 7/20 through 8/20 has been a decline of 1.25%, while the median three-month performance has been a decline of 0.43%. On a percentile basis, these performance figures rank in just the 4th and 6th percentile, respectively.”

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Long-term wealth is not made in three months, but a lot sure can happen over three months. Just think about how investors felt when COVID-19 first affected the U.S. markets and how things progressed over the following three months—it was definitely a wild ride. “Buy and hold” falls short because portfolios can essentially be cut in half in very short periods of time. It can take years for a bull market to make an investor wealthy, but a bear market can wipe out that wealth in a matter of months, sometimes even weeks.

Bespoke expanded their research to an annual composite basis, which is more robust in terms of seasonality studies since they go back 40 years. Here’s some of what Bespoke’s longer-term research states:

“Below is an annual composite chart of the S&P 500 for all years since 1980. What's interesting to note about this chart is that on an average basis, the peak for the summer comes on 7/17, and from there, the S&P 500's YTD performance doesn't top the level from 7/17 for another 58 trading days until 9/13. As is apparent in the chart, you can see that this is also the longest period of time throughout the calendar year that the S&P 500's average YTD change doesn't make a high for the year. While the S&P 500 tends to make a modestly higher high on 9/13, the period from 9/16 through 11/1 has historically been the second-longest stretch where the S&P 500's average YTD change goes without making a new high.”

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Inflation readings have remained below the Federal Reserve’s 2% annual target and yields decreased slightly during last week. Regarding the corporate market, T. Rowe Price reports,

“The investment-grade corporate bond market saw light trading volumes amid fairly balanced buying and selling activity. Positive flows and modest new issuance due to earnings blackout periods provided technical support for the asset class, while the volume of new deals was well below early estimates. Light issuance, along with equity gains and continued flows into the asset class, supported the high yield market. Buyers were generally more active than sellers, although our traders noted that the summer lull in overall trading volumes appears to have set in.”


Gold continued to rise for the sixth straight week. It closed above the $1,800 resistance level last week, potentially turning that resistance level into a new support level if gold’s rise continues. As is visible by the red line on the following chart, the price of gold has hovered above $1,800, testing that level multiple times in the past two weeks.​​​​​​​

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All signs point to gold! Stocks are expected to go sideways over the next three months, gold has broken old resistance levels, we are now in a Stagflation regime, and volatility is high and falling (more on this in “The indicators” section below).

No one can be certain what the future holds, but gold has historically proven to be a good addition to a portfolio of stocks and bonds during uncertain times. If you haven’t already, I encourage you to read the 2020 update of our white paper “The Role of Gold in Investment Portfolios,” which can be found here: (for financial professionals only). The research shows what the optimal allocation percentage to gold should be within a portfolio of stocks and bonds based on almost 50 years of asset-class data.

At Flexible Plan Investments, we have multiple ways for investors to add gold to their portfolios. The most direct way is via The Gold Bullion Strategy Fund (QGLDX), the first-ever, and still only, mutual fund designed to track the daily price changes in gold bullion in the United States.

If you’re looking to invest in gold through an investment strategy, our QFC TVA Gold strategy seeks to provide a steady rate of return with less risk than that experienced with either gold or the S&P 500. Last week, QFC TVA Gold gained 0.42% after fees.

Our most popular way of accessing gold indirectly, purchased within a strategy allocation of stocks and bonds, is our All-Weather Dynamic - Leveraged strategy. The strategy attempts to create a robust portfolio for all market regimes using stocks, bonds, and gold. Last week, the strategy returned 0.82% after fees.

Both strategy options are dynamically risk managed, which means they are designed to adapt to changing market conditions.

The indicators

Flexible Plan’s Growth and Inflation measure, one of our Market Regime Indicators, shows that we remain in a Stagflation economic environment stage (meaning a positive monthly change in the inflation rate—though still below the Fed’s 2% target—and negative monthly GDP reading). Historically, Stagflation has been a positive regime state for gold, which tends to outpace both stocks and bonds during such an environment.

Our Volatility composite (gold, bond, and stock market) is still showing a High and Falling reading, which favors gold over bonds and then stocks, although all have positive returns in this regime stage.


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