Market insights and analysis

By Daniel Poppe

Market snapshot

•  Stocks: Stocks were up last week.

•  Bonds: The 10-year Treasury yield fell 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 moved higher last week. The Russell 2000 returned 4.49%, the Dow returned 2.03%, the NASDAQ Composite returned 1.77%, and the S&P 500 returned 1.72%. The 10-year Treasury bond yield fell from 4.43% to 4.41%. Spot gold closed the week up 5.97%.

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.

With almost all S&P 500 companies having reported for the Q3 2024 earning season, FactSet’s Earnings Insight report shows that most companies reported a positive earnings surprise and positive revenue surprise. The forward price-to-earnings (P/E) ratio for the Index is above both its 5-year and 10-year averages.

The S&P 500 remains near all-time highs after the 2024 U.S. election cycle has come to a close and as the winter holiday season approaches. AI enthusiasm, uncertainty around the election dissipating, and continued optimism for a soft landing have seemingly enabled stocks to approach the end of the year with solid gains intact.

Bonds

The iShares 7-10 Year Treasury Bond ETF (IEF), which tracks intermediate-term Treasury bonds, finished last week below its 50-day average but a hair above its 200-day moving average.

Bond prices have fallen substantially since the Federal Reserve cut interest rates in September meeting. Risk-on assets have soared while risk-off assets have tumbled. Investors seem to be vying for higher-risk and potentially higher-rewarding assets as of late and bonds have been given the cold shoulder.

At least for the time being, that means that new bond investors can earn higher yields on some of the longer-dated maturities. However, rates on the short end of the curve are expected to drop. CME Group’s FedWatch tool indicates a higher probability than not of a cut at the next FOMC meeting in December. More cuts are possible throughout 2025 as well. Of course, the Fed will be considering developments in the data as it comes in to determine how many and how large of cuts, if any, to make moving forward.

Many more factors will go into whether long-term yields end up following short-term yields lower if that’s the course they take. Factors such as long-term inflation expectations and long-term GDP growth prospects will come into play when determining how much demand there is for the longer-dated fixed income securities.

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 120% net long exposure to the S&P 500. Exposure changed to a 170% net long exposure on Monday, a 110% net long exposure on Tuesday, a 60% net long exposure on Wednesday, and a 40% net long exposure on Thursday.

Our QFC Political Seasonality Index strategy started the week defensive, but shifted to an aggressive position at Wednesday’s close. (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 an allocation of 60% net long to the NASDAQ 100. It decreased this to an allocation of 20% net long on Monday, brought that up to 40% net long on Wednesday, increased it to 80% net long on Thursday, and increased it again to 100% net long on Friday.

The Systematic Advantage strategy had a 120% allocation to the S&P 500 at the start of the week. On Friday, it increased exposure to 150%.

Our QFC Self-adjusting Trend Following strategy’s primary signal was 0% exposure to the NASDAQ 100 at the start of the week, moved to 100% net long exposure on Wednesday, returned to a 0% exposure on Thursday, and to a 200% net long exposure on Friday.

The Volatility Adjusted NASDAQ, Systematic Advantage, QFC Self-adjusting Trend Following, and the QFC S&P Pattern Recognition strategies can all employ leverage—hence the investment positions may at times be more than 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.