Market insights and analysis

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

1st Quarter | 2024

Quarterly recap



Current market environment performance of dynamic, risk-managed investment solutions.

By Jerry Wagner

Market Snapshot 

•  Stocks: The major stock market indexes mainly finished higher last week. Despite current sluggishness and concerns over market breadth, the outlook for equities remains optimistic, with indicators suggesting potential for double-digit gains ahead.

•  Bonds: The 10-year Treasury bond yield has risen sharply since Christmas, reflecting growing skepticism in the bond market about a quick decrease in interest rates.

•  Gold: Gold has retraced some of its late-2023 gains amid rising bond yields, a strengthening U.S. dollar, and the anticipation of interest rate movements.

•  Market indicators and outlook: Market regime indicators show the market is in a Normal economic environment stage, historically positive for stocks, bonds, and gold but with a substantial risk of a downturn for gold. Normal is one of the best stages for stocks, with limited downside. Volatility is Low and Rising, favoring gold over stocks and bonds.


Most major stock market indexes finished higher last week. The Dow Jones Industrial Average gained 0.7%, the S&P 500 Index rose 1.1%, and the NASDAQ Composite climbed 2.3%. The Russell 2000 small-capitalization index lost 0.5%.

Bonds struggled. The U.S. Aggregate Bond ETF (AGG) fell 1.1%. The 20-year Treasury bond ETF (TLT) tumbled 2.5%. The 10-year Treasury bond yield rose 18 basis points to 4.129%. Gold futures closed at $2,030.90, down $20.70 per ounce, or 1.01%, while the U.S. trade-weighted dollar rose 0.83%.

For the latest information on our Quantified Funds, check out our weekly fund updates. You can also see the daily holdings of the funds here.


The S&P 500 Index rallied to an all-time high last Friday (January 19), reaching a peak not seen in over two years. This event marked the seventh-longest period between new highs since 1928. Historically, achieving a new market high after at least a year without one has been an excellent omen. In such instances, stocks have risen the following year 93% of the time, with an average gain of about 14%.

Monday (January 22), the Dow followed suit, and the NASDAQ Composite is just a few percentage points below its high-water mark. Despite showing signs of strength before Christmas, the small-cap Russell 2000 index was about 20% below its all-time high as of last Friday. This gap represents the most significant deficit ever at the time of an S&P 500 market high.

The Russell seemed to wake from its 2022-2023 slumber during the rally that began last October, responding to the belief that the Federal Reserve was done raising interest rates and would soon lower them. This rally made sense since small-cap stocks suffer the most from rising rates. But this year, the S&P has climbed, and the Russell has fallen, reflecting Wall Street’s increased skepticism for a quick reversal in interest rate direction.

As recently as this weekend, Fed members warned that the bond market might be getting ahead of itself, expecting a brief pause followed by a quick reversal in interest rates. That, combined with the market’s overbought nature from its sharp rise in the last quarter, has dampened the stock market’s advance in 2024. Still, like new highs, past pauses led, on average, to double-digit gains in the S&P 500 over the following year.

Last week’s better-than-expected economic reports brought substantial good news to the stock market. Retail sales were strong, and jobless claims were less than forecast. The most surprising news came from the University of Michigan Consumer Sentiment Survey, which jumped over 13% to reach 78.1—considerably above the anticipated 70.1. This reading is the highest survey level since early in the Biden administration in July 2021.

This positive news has reignited the stock market rally, with even small-cap stocks experiencing a belated surge, gaining over 2% on Monday.

Of course, such “news-driven” rallies can be short-lived, lasting only as long as the media feeds the market furnace new fuel. This week, attention will turn to the U.S. Gross Domestic Product Report and the Federal Reserve’s favorite inflation gauge, the core personal consumption expenditures (PCE) price index.

Expectations are that early company earnings reports for the fourth quarter of 2023 will also influence the market. The money center banks, always first in the earnings reporting line, received positive reviews from the market for their expectation-beating results last week. While more companies will release earnings news this week, the floodgates will truly open next week with over 10% of the S&P 1500 companies scheduled to report.

We usually get a clue about the direction of earnings from the direction of analyst activity in the four weeks leading up to earnings season. When there are many downgrades, earnings tend to outperform since the downgrades create more opportunities for upside surprises.

This quarter, however, analyst changes in the last four weeks have been only slightly to the downside. This may not leave much room for the upside surprises that many investors are hoping for this time around.

Even with the S&P and Dow reaching new highs, some weaknesses have appeared in the stock market rally that began in October. In addition to small-cap and mid-cap stocks starting 2024 on a downward trend, as of Friday, only 37% of the S&P 500 companies were up for the year, with the average stock down 1.3%.

Furthermore, the number of stocks on the New York Stock Exchange making new 52-week lows exceeded those making 52-week highs for the first time in a while. Although this trend quickly reversed, it does demonstrate a lack of breadth in the 2024 market. Once again, technology stocks—specifically, the “Magnificent Seven” mega-cap stocks—dominate early-year gainers.

Bottom line: While sluggishness near the recent market high might continue as we remain near overbought levels, with market breadth not what it once was early in the current market rally, our intermediate-term outlook for equities remains bright. Many indicators continue to point to double-digit gains ahead.


The 10-year Treasury bond yield has risen by almost half a percentage point since falling to the 3.8% level around Christmas. As mentioned earlier, the bond market seems increasingly skeptical that interest rates will drop as far and as fast as many thought during the fourth quarter of 2023. However, as a positive sign for those hoping for rates to fall, the yield immediately bounced down from its 50-day moving average on Monday.

As bond yields have risen, bond prices have tumbled. The long-term government bond ETF (TLT) price has fallen each of the last four weeks.

Like much of the stock market, the high-yield sector of the bond market has recently stalled. Naturally, the decline in bond prices has not helped improve the performance of their closely related brethren.


Like bonds, gold has returned some of its fourth-quarter gains since Christmas. The two asset classes have recently been moving in tandem, as rising yields are assumed to be harmful to gold (it has no competitive income stream and only incurs costs in holding it).

This close relationship was evident last week in the asset classes’ response to the Labor Department’s better-than-expected report on U.S. jobless claims. As the market absorbed the news throughout the day, yields on the 10-year bond surged, and the price of gold tumbled.

Rising yields usually make the U.S. dollar more attractive than other currencies. The same applies to its value versus gold.

Gold currently sits atop its 50-day moving average. We will soon see if that measure can provide some much-needed short-term technical support for the price of the yellow metal. Unfortunately, the price chart for the dollar shows that it has already pierced through its 50-day moving average, indicating potential for further upside for the dollar and weakness for gold.

Flexible Plan Investments (FPI) is the subadvisor to the only U.S. gold mutual fund, The Gold Bullion Strategy Fund (QGLDX), designed at its introduction 10 years ago to track the daily price changes in the precious metal in a more tax-efficient manner than its ETF counterpart, GLD.

The indicators

The very short-term technical indicators for stocks that I watch are mostly bullish. The QFC S&P Pattern Recognition strategy is currently at a 190% level of exposure to the S&P 500 Index.

Our QFC Political Seasonality Index (PSI) strategy has been in the stock market since December 21. It will sell again on January 31 before returning to being fully invested in stocks on February 9. Our QFC Political Seasonality Index strategy is available separately and included in our QFC Multi-Strategy Explore: Special Equities and QFC Multi-Strategy Portfolio strategies. (The PSI calendar—with all of the 2024 daily signals—can be found post-login in our Weekly Performance Report section under the Domestic Tactical Equity category.)

FPI’s intermediate-term tactical strategies remain primarily invested in stocks. Classic continues 100% long equities. The Volatility Adjusted NASDAQ (VAN) strategy is 140% exposed to the NASDAQ 100, the Systematic Advantage (SA) strategy is 120% in equities, and our QFC Self-Adjusting Trend Following (QSTF) strategy is positioned 200% in the NASDAQ 100. VAN, SA, and QSTF can all employ leverage—hence, the investment positions may sometimes be more than 100%.

The Quantified STF Fund (QSTFX), the primary investment held in our QFC Self-Adjusting Trend Following strategy, was once again named Morningstar's top tactical allocation fund for 2023. The fund returned more than 60% in 2023, while the NASDAQ 100 returned 55.13% over the same period. When the NASDAQ 100 rallied, QSTFX was the place to invest.*

Flexible Plan’s Growth and Inflation measure is one of our Market Regime Indicators. It shows that markets are in a Normal economic environment stage (inflation and GDP are growing).

Historically, a Normal environment has occurred 60% of the time since 2003. Gold tends to outperform stocks and bonds on an annualized return basis in a Normal climate. Still, it also carries the most downside risk. From a risk-adjusted perspective, Normal is one of the best stages for bonds, followed by gold and then stocks.

Our S&P volatility regime is registering a Low and Rising reading. This environment sees positive returns for all asset classes. Still, it favors gold over equities and then bonds from an annualized return standpoint. Volatility, of course, favors bonds, as does the risk-adjusted return (RAR) statistic. Gold and stocks are equal in the max drawdown category (approximately 18%). So, gold beats out equities in the RAR category. The Low and Rising combination has occurred 27% of the time since 2003.

*Ceros Financial Services recommends that investors independently evaluate particular investments or products, and encourages investors to seek the advice of a financial advisor or private wealth advisor. The appropriateness of a particular investment or product will depend upon an investor's individual circumstances and objectives. Past performance is not indicative of future results. There is no guarantee any investment strategy will generate a profit or prevent a loss.

The views, opinions, or advice contained within third-party materials are solely those of the author, who is not a Ceros Financial Services employee, and do not necessarily reflect those of Ceros Financial Services, or its affiliates.

Ceros Financial Services, Inc., member FINRA/SIPC, serves as distributor to the funds and is a commonly held affiliate of Advisors Preferred. Advisors Preferred and Ceros are not affiliated with the funds’ subadvisers.

An investor should carefully consider the investment objectives, risks, charges, and expenses of the Quantified Funds before investing. This information can be found in the Funds' prospectus and summary prospectus, which can be obtained by calling 1-855-650-7453 or by visiting It is important to read the prospectus carefully before investing in the Quantified Funds.

© 2024 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.

The Quantified STF Fund (QSTFX) was rated against the following numbers of U.S. Tactical Allocation funds over the following time periods: 238 funds overall, 238 funds in the last three years, and 217 funds in the last ­five years. With respect to these Tactical Allocation funds, the Quantifi­ed STF Fund received a 3-star rating overall, 2 stars for three years and 3 stars for ­five years.

The Morningstar award was given by Morningstar on January 17, 2024 (for 2023 based on Morningstar fund data as of December 31, 2023); January 14, 2021 (for 2020 based on Morningstar fund data as of December 31, 2019); and March 13, 2018 (for 2017 based on Morningstar fund data as of December 31, 2016). No fee was paid in connection with this award.

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