Current market environment performance of dynamic, risk-managed investment solutions.
By Daniel Poppe
Market snapshot
• Stocks: Stocks were up last week.
• Bonds: The 10-year Treasury yield rose last week.
• Gold: Spot gold rose last week, closing above $2,700 an ounce.
• Market indicators and outlook: Market regime indicators show the market is in a Normal economic environment stage, which is 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 High and Rising, which favors stocks over gold, then bonds.
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The major U.S. stock market indexes were up last week. The Dow returned 2.19%, the S&P 500 returned 1.76%, the NASDAQ Composite returned 1.65%, and the Russell 2000 returned 1.40%. The 10-year Treasury bond yield rose from 4.61% to 4.63%. Spot gold closed the week up 2.49%.
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.
Stocks
The SPDR S&P 500 ETF (SPY), which tracks the performance of the S&P 500, finished the week above both its 50-day and 200-day moving averages.
Stocks performed well during the first week of President Trump’s second term. The major equity indexes finished the week higher and are up year to date, building on last year’s strong gains.
The fourth-quarter 2024 earnings season has begun, with 16% of S&P 500 companies reporting so far. According to FactSet’s Earnings Insight report, most companies have posted positive earnings per share (EPS) and revenue surprises. Blended earnings growth is at a robust 12.7%. The forward price-to-earnings (P/E) ratio for the index remains high, exceeding both the five-year and 10-year averages. These figures are subject to change as additional companies report.
Bonds
The iShares 7-10 Year Treasury Bond ETF (IEF), which tracks intermediate-term Treasury bonds, finished last week below both its 50-day and 200-day moving averages.
Bond yields remain elevated, and prices are lower compared to recent months. The Federal Open Market Committee (FOMC) is expected to leave the federal funds rate unchanged at its upcoming meeting, marking a shift from the three consecutive rate cuts in late 2024.
Inflation made conflicting moves in December. Headline inflation rose from an annualized rate of 3.66% to 4.91%, driven largely by higher energy prices. Meanwhile, core inflation, which excludes energy and food prices, fell from an annualized rate of 3.66% to 2.43%.
Gold
The SPDR Gold Shares ETF (GLD), which tracks the price of gold, finished the week above both its 50-day and 200-day moving averages.
Flexible Plan Investments (FPI) is the subadviser to the only U.S. gold mutual fund, The Gold Bullion Strategy Fund (QGLDX), designed at its introduction 11 years ago to track the daily price changes in the precious metal in a more tax-efficient manner than its ETF counterpart, GLD.
FPI’s indicators
The QFC S&P Pattern Recognition strategy’s primary signal started last week with a 100% net long exposure to the S&P 500. Exposure changed to 110% net long on Tuesday, 100% net long on Wednesday, 70% net long on Thursday, and 0% on Friday.
Our QFC Political Seasonality Index strategy was defensive at the start of the week. The strategy shifted to an aggressive positioning on Tuesday. (Our QFC Political Seasonality Index is available—with all of the daily signals—post-login in our Weekly Performance Report section under the Domestic Tactical Equity category.)
The Volatility Adjusted NASDAQ strategy started the week with a 60% net long allocation to the NASDAQ 100 and increased to 100% net long on Friday.
The Systematic Advantage strategy held a 120% net long allocation to the S&P 500 throughout the week.
Our QFC Self-adjusting Trend Following Strategy’s primary signal was 200% net long the NASDAQ 100 throughout the week.
The Volatility Adjusted NASDAQ, Systematic Advantage, QFC Self-adjusting Trend Following, and QFC S&P Pattern Recognition strategies can use leverage, which can result in investment positions exceeding 100%.
Our Classic model remained in stocks throughout last week. Most of our Classic accounts follow a signal that will allow the strategy to change exposure in as little as a week. A few accounts are on platforms that are more restrictive and can take up to one month to generate a new signal.
FPI’s Growth and Inflation measure is one of our Market Regime Indicators. It shows that we are in a Normal economic environment stage (meaning a positive monthly change in prices and a positive monthly change in GDP). Historically, a Normal environment has occurred 60% of the time since 2003 and has been a positive regime state for stocks, bonds, and gold. Gold tends to outpace both stocks and bonds on an annualized return basis in a Normal environment but carries a substantial risk of a downturn in this stage.
Our S&P volatility regime is registering a High and Rising reading, which favors stocks over gold and then bonds from an annualized return standpoint. The combination has occurred 23% of the time since 2003. It is a stage of high risk for equities.