Market Update 12/29/25

By Will Hubbard

Market snapshot

•  Stocks: The market continued this year’s “Santa rally.” The S&P 500 rose 1.41%, the NASDAQ Composite gained 1.23%, and the Dow Jones Industrial Average advanced 1.20%. The Russell 2000 small-cap index added 0.21% for the week.

•  Bonds: Interest rates remained steady amid a lighter economic calendar and expectations for potential rate cuts in 2026. The 10-year Treasury yield fell from 4.15% to about 4.13%.

•  Gold and commodities: Commodities rallied. Gold prices jumped 4.48%, ending the week at $4,533.21 an ounce.

•  Market indicators and outlook: Strategy positioning remained broadly bullish, with some exposure reductions reflecting ongoing risk management. Market regime indicators continue to show a Normal economic environment, which has historically been 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 remains Low and Falling, which favors stocks over gold and then bonds.

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Stocks

U.S. equities posted gains during the holiday-shortened week. Trading volumes were light, and price action was subdued as investors stepped to the sidelines after a strong December advance.

Large-cap indexes held near recent highs but lacked momentum, reflecting more consolidation than conviction. Leadership remained narrow, with defensive and quality-oriented names holding up better than higher-beta ones, such as the “Magnificent Seven.” The following chart compares the performance of the Magnificent Seven, represented by MAGS, with quality stocks, represented by QUAL. The higher-beta names faced more pressure going into the weekend.

Economic data was sparse due to the holiday calendar, reinforcing the narrative of a slowing but resilient economy. Inflation trends continue to move in the right direction, while growth remains steady enough to limit recession concerns. Preliminary fourth-quarter GDP estimates released Tuesday came in above expectations at 4.3%, compared with forecasts of 3.3%. Markets are increasingly focused on early 2026 data for confirmation rather than reacting to short-term noise.

The key takeaway is that investors should be prudent, review their portfolios for risks, and look to make adjustments as conditions warrant. Periods like this often highlight the role of active management in navigating changing conditions and helping investors remain focused.

Bonds

Bond markets were calm last week, with Treasury yields little changed. The 10-year yield fell 2 basis points to 4.13%. The absence of major economic releases kept rates range-bound, as investors continue to anchor expectations around gradual Federal Reserve easing in 2026.

Credit markets remained stable, with no signs of stress. The broader bond trend continues to favor carry and income rather than near-term price appreciation.

With equity valuations creeping higher, future volatility looms. And with interest rates still well above the lows of the last decade, it may be worth monitoring that space for opportunities.

Gold and commodities

Gold and silver prices rose last week during what some described as year-end “Christmas chaos.” Heightened volatility and speculation around supply dynamics—particularly involving silver and China—helped drive short-term price gains, with silver leading the move late in the week. Over the longer term, demand for precious metals continues to be supported by geopolitical uncertainty and ongoing diversification by central banks.

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.

The indicators

Our QFC S&P Pattern Recognition strategy started the week at 200% long exposure, reduced to 140% long on Tuesday, scaled back to 90% on Wednesday, and finished the week at 60% long on Friday.

Our QFC Political Seasonality Index started the week in a risk-on posture and remained there 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).

Our intermediate-term tactical strategies have been varied in their degree of defensive positioning. The key advantage these strategies offer investors is their ability to adapt to changing market environments—participating during uptrends and moving to a defensive posture during downtrends.

The Volatility Adjusted NASDAQ strategy started the week 140% long and reduced exposure to 120% long during Wednesday’s shortened trading session. The Systematic Advantage strategy started and ended the week 50% long. Our QFC Self-adjusting Trend Following strategy started and ended the week 200% long. These strategies can employ leverage, so their exposure may exceed 100% at times.

Our Classic model remained fully risk-on all week. Most Classic accounts follow a signal that can change exposure within a week, though a few remain on platforms requiring up to a month to adjust to new signals.

FPI’s Growth and Inflation measure, one of our Market Regime Indicators, shows that we are in a Normal economic environment (characterized by falling inflation and growing 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 drawdowns 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.