Market Update 10/12/26

By Daniel Poppe

Market snapshot

•  Stocks: The major U.S. stock market indexes were mostly higher last week. The Russell 2000 fell 0.90%, the NASDAQ Composite gained 0.65%, the Dow Jones Industrial Average rose 0.96%, and the S&P 500 advanced 1.17%.

•  Bonds: The 10-year Treasury bond yield fell from 5.28% to 5.24% last week.

•  Gold: Spot gold rose 1.28%.

•  Market indicators and outlook: The economic environment is classified as Normal, favoring stocks and gold for returns. Volatility is Low and Rising, a regime historically favorable for stocks over other asset classes on a return basis.

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

Stocks

The SPDR S&P 500 ETF (SPY) remained above its 50-day and 200-day moving averages last week, keeping its uptrend intact.

The S&P 500 reached a new closing high on Tuesday, but participation in the advance remained narrow. According to Bespoke Investment Group’s Oct. 9 report, fewer than one-third of index members were above their 50-day moving averages, while only 46% were above their 200-day averages. Tuesday marked the first time on record the index reached a 52-week high with fewer than one-third of its stocks above their 50-day moving averages.

There were some signs of improvement beneath the surface. Bespoke noted that Tuesday was also the first session since Sept. 14 with positive net new highs, while the one-month average remained negative at -2.8%. Bespoke found only about a dozen sessions since 1990, including Tuesday, in which the S&P 500 reached a 52-week high while that average was negative.

Participation broadened further by the end of the week, with nine of 11 sectors finishing higher. Consumer Staples, a defensive sector, led with a 3.99% gain. Large-cap technology lagged the broader market, with the NASDAQ 100 adding just 0.25% for the week.

Bonds

The iShares 7-10 Year Treasury Bond ETF (IEF) and the iShares 20+ Year Treasury Bond ETF (TLT) both remained below their 50-day and 200-day moving averages last week, keeping the trend negative for intermediate- and long-term Treasury bonds.

Expectations for further Federal Reserve tightening remained a headwind. According to Trading Economics, minutes from the Fed’s September meeting showed that most policymakers expect another rate increase this year, although the timing remains uncertain. Fed Governor Waller also said Thursday that additional rate hikes will likely be needed to bring inflation back to target, while emphasizing flexibility around the pace of increases. The 10-year Treasury yield briefly reached a 24-year high during Thursday’s session before easing back.

Next week’s CPI and PPI reports are the next test for rates. According to Bespoke Investment Group’s Oct. 9 report, the 10-year yield remains near a multidecade high, and the economy could begin to feel the effects of persistently high rates and energy prices. Headline CPI is expected to rise 0.6% month over month, and Bespoke noted that any upside surprise could add further upward pressure on rates.

Gold

The SPDR Gold Shares ETF (GLD) finished the week below its 50-day and 200-day moving averages. Gold rebounded, but the move was not enough to reverse the broader negative trend.

The weekly gain came despite a firmer U.S. dollar. The U.S. dollar index rose 0.28% for the week. Expectations for additional Federal Reserve tightening remained a headwind for the non-yielding metal. According to a Reuters article (published by Kitco News), minutes from the September meeting showed policymakers divided over the rationale for further rate increases. At the time, CME FedWatch put the probability of an October hike at about 22% and a December increase at about 85%. Additional Reuters reports noted that Fed officials, including Governor Waller, Kansas City Fed President Jeff Schmid, and St. Louis Fed President Alberto Musalem, also indicated that additional hikes may be needed, keeping higher rates a potential headwind for gold. According to Kitco NewsWire, next week’s September CPI and PPI reports could keep that pressure on bullion.

Oil and Middle East developments also remained part of the gold outlook because of their potential effect on inflation and interest rates. According to Kitco NewsWire, attacks on vessels around the Gulf and Strait of Hormuz reached their highest weekly pace since the Iran war began, while hurricane-related shutdowns reduced U.S. Gulf oil production. Higher crude prices added to inflation concerns and upward pressure on yields, creating an indirect headwind for gold.

By Friday, some of that pressure had eased after President Trump said the U.S. would not attack Iran before the Nov. 3 midterm elections. Kitco NewsWire reported that the announcement reduced near-term strike fears, although shipping risks and hurricane-related supply disruptions continued to support elevated oil prices.

COMEX gold futures returned 1.30% over the week. The Quantified Gold Futures Tracking Fund (QGLDX) returned 1.10% for the same period. Launched in 2013, the fund is designed 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 the week with a 190% net long exposure to the S&P 500. Exposure was reduced to 60% net long on Tuesday, shifted to 80% net short on Wednesday, moved to 10% net long on Thursday, and increased to 100% net long on Friday.

Our QFC Political Seasonality Index strategy was aggressive throughout the week. Our QFC Political Seasonality Index—with all of the daily signals—is available after login in our Weekly Performance Report section under the Domestic Tactical Equity category.

The Volatility Adjusted NASDAQ strategy started the week with a 100% net long exposure to the NASDAQ 100. Exposure increased to 140% net long on Tuesday, 160% net long on Wednesday, and 180% net long on Thursday before decreasing to 140% net long on Friday.

The Systematic Advantage strategy started the week with a 90% net long exposure to the S&P 500. Exposure increased to 120% net long on Monday before returning to 90% net long on Tuesday, where it remained through Friday.

Our QFC Self-adjusting Trend Following strategy’s primary signal held a 0% net long exposure to 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 all employ leverage, so the investment positions may at times exceed 100%.

Our Classic model remained aggressive 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, one of our Market Regime Indicators, shows that markets are in a Normal economic environment (inflation and GDP are growing). Historically, a Normal environment has occurred 75% of the time since 2003 and has been a positive regime for stocks, bonds, and gold. Stocks have the highest returns in Normal periods. Gold has the second-highest return but has also experienced high drawdowns in these environments.

Our S&P volatility regime is registering a Low and Rising reading. Since 2003, this environment has favored stocks over gold, and then bonds, in both annualized return and risk-adjusted return terms. Gold has the highest drawdown risk among the three asset classes. Bonds have the lowest return, risk, and drawdown. The Low and Rising combination has occurred 22% of the time since 2003.