Current market environment performance of dynamic, risk-managed investment solutions.
By Daniel Poppe
Market snapshot
• Stocks: Stocks were mixed last week. The NASDAQ Composite lost 1.61%, the S&P 500 fell 0.61%, the Dow Jones Industrial Average gained 1.10%, and the Russell 2000 rose 1.21%.
• Bonds: The 10-year Treasury bond yield rose from 4.14% to 4.19%.
• Gold: Spot gold rose 2.43% last week, closing above $4,200 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 and then bonds.
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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 have continued to trade sideways after reaching new highs in late October. Investors are standing by as companies race to implement AI tools to achieve productivity gains. Concerns remain that the labor market could be weakening, which could lead to a softer consumer backdrop.
Stock prices are substantially higher than at the beginning of the year, so a pause in valuation expansion could be warranted. With fourth-quarter earnings reports still several weeks away, a period of relatively steady market action could persist. Year-to-date gains remain substantial, especially considering the springtime volatility.
Bonds
The iShares 7-10 Year Treasury Bond ETF (IEF), which tracks intermediate-term Treasury bonds, finished last week below its 50-day moving average but above its 200-day moving average.
Bonds have fallen from recent highs despite the Federal Reserve’s latest rate cut. Last week, the federal funds rate was cut by another 25 basis points, bringing the total reduction to 75 basis points across three separate meetings in 2025, a pace similar to that seen in 2024. Even so, intermediate- and long-term bonds have not risen substantially over the past few months.
Inflation remains above the Fed’s 2% target, and continued tariff policy may be contributing to investor skepticism about the Fed’s ability to maintain very low short-term rates in the future. As a result, bond investors appear cautious despite recent policy easing.
The Fed’s next meeting is scheduled for the end of January. CME Group’s FedWatch tool currently indicates that investors expect no change in rates at the meeting. Fewer cuts going forward could put a damper on bond prices.
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). 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 50% net long exposure to the S&P 500. Exposure changed to 20% net long on Wednesday before moving back to 50% net long on Thursday.
Our QFC Political Seasonality Index strategy started the week in a defensive posture and shifted to an aggressive position on Thursday. (Our QFC Political Seasonality Index—with all of the daily signals—is available post-login in our Weekly Performance Report section under the Domestic Tactical Equity category.)
The Volatility Adjusted NASDAQ strategy started the week with a 120% net long exposure to the NASDAQ 100. Exposure increased to 200% net long on Monday, declined to 180% net long on Tuesday, and returned to 200% net long on Wednesday.
The Systematic Advantage strategy started the week with a 60% net long exposure to the S&P 500 and increased to 90% net long on Wednesday.
Our QFC Self-adjusting Trend Following strategy’s primary signal was 200% net long the NASDAQ 100 throughout the week.
Because the Volatility Adjusted NASDAQ, Systematic Advantage, QFC Self-adjusting Trend Following, and the QFC S&P Pattern Recognition strategies can employ leverage, their investment positions may at times exceed 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 stocks and gold.