Current market environment performance of dynamic, risk-managed investment solutions.
By Daniel Poppe
Market snapshot
• Stocks: Stocks were mixed last week. The NASDAQ Composite gained 0.50%, the S&P 500 rose 0.13%, the Dow Jones Industrial Average lost 0.64%, and the Russell 2000 fell 0.83%.
• Bonds: The 10-year Treasury bond yield fell from 4.19% to 4.16%.
• Gold: Spot gold rose 0.91% last week, closing above $4,300 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 Low and Falling, 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 and is once again near all-time highs.
As the traditional Santa Claus rally unfolds, stocks have continued to hold steady as the year draws to a close. It has been a strong year for stocks, with gains after April more than offsetting losses from the first four months. Valuations are elevated, reflecting optimism around new technological developments. Still, at these rarefied levels, corrections can easily develop. While short-term indicators remain positive, careful monitoring will be essential as the new year begins.
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.
Source: Koyfin
Bonds have traded mostly sideways alongside stocks over the past couple of months, despite the Federal Reserve’s rate cuts. The Fed lowered rates three times in 2025, and more cuts are possible in 2026. However, uncertainty around inflation data has complicated the outlook.
The November consumer price index report, released last Thursday, was significantly affected by the recent government shutdown, raising questions about its reliability. An accurate measure of inflation is vitally important for the Fed as it determines the appropriate path for short-term interest rates.
A review of actual commodity prices does tend to support a softer price environment for most consumer items, as agricultural and oil prices declined during the year. The primary exception, and it is a big one, can be seen in the livestock category. As the following chart shows, though, there was a wide range of price changes across different commodities over the past year.
The Fed’s next meeting is scheduled for the end of January. CME Group’s FedWatch tool currently indicates that investors expect no rate change at the meeting. New data released between now and then could influence the Fed’s decision.
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. Yesterday, it hit an all-time high, having risen more than 75% this year.
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 short exposure to the S&P 500. Exposure shifted to 120% net long on Tuesday, increased to 180% net long on Wednesday, and rose to 200% net long on Thursday. The strategy continues to outperform its S&P 500 benchmark by a wide margin.
Our QFC Political Seasonality Index strategy was aggressive throughout the week. (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 200% net long exposure to the NASDAQ 100. Exposure declined slightly to 180% net long on Thursday and fell further 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 was reduced to 30% net long on Monday and increased to 60% net long on Friday.
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 QFC S&P Pattern Recognition strategies can all 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, one of our Market Regime Indicators, shows that we are in a Normal economic environment stage (meaning a positive monthly change in both prices and GDP). Historically, a Normal environment has occurred 75% of the time since 2003 and has been a positive regime state for stocks, bonds, and gold. Stocks have the highest rate of return in Normal periods. Gold has the second-highest return but has also experienced high drawdown in these environments.
Our S&P volatility regime is registering a Low and Falling reading, which favors stocks over gold and then bonds from an annualized return standpoint. The combination has occurred 32% of the time since 2003. It is a stage where gold has experienced a high level of drawdown.