Current market environment performance of dynamic, risk-managed investment solutions.
By Daniel Poppe
Market snapshot
• Stocks: Stocks were down last week.
• Bonds: The 10-year Treasury yield fell last week.
• Gold: Spot gold rose last week, closing above $2,800 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 Falling, which favors gold over bonds and then stocks.
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The major U.S. stock market indexes were down last week. The S&P 500 returned -0.23%, the Russell 2000 returned -0.33%, the NASDAQ Composite returned -0.53%, and the Dow returned -0.54%. The 10-year Treasury bond yield fell from 4.58% to 4.49%. Spot gold closed the week up 2.24%.
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.
Stocks have been trading steadily within a narrow range as they absorb fourth-quarter earnings reports. According to FactSet’s latest Earnings Insight report, more than half of S&P 500 companies have reported so far. Among them, most have posted positive earnings per share (EPS) and revenue surprises. Blended earnings growth is strong at 16.4%. The Index’s forward price-to-earnings (P/E) ratio remains high, above both its five-year and 10-year averages.
The U.S. Bureau of Economic Analysis released its initial estimate of fourth-quarter 2024 gross domestic product (GDP) growth at 2.3%, down from 3.1% in the third quarter. Consumer spending was by far the largest source of growth for the quarter, while investment spending weighed on the overall figure.
Bonds
The iShares 7-10 Year Treasury Bond ETF (IEF), which tracks intermediate-term Treasury bonds, finished last week above its 50-day moving average but below its 200-day moving average.
Bond yields have fallen in recent weeks, driving bond prices higher. Investors continue to adjust expectations for inflation and future rate changes as the new administration in Washington announces policy details, especially regarding tariff levels, a key area of focus.
The Federal Reserve left interest rates unchanged at its January meeting, marking a shift from the rate cuts in its previous three meetings. The pause follows a higher headline inflation reading in December as the Fed awaits more data to gauge the state of the economy. According to CME Group’s FedWatch tool, the market anticipates another pause at the Fed’s next meeting in March.
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 20% net long exposure to the S&P 500. Exposure increased to a 30% net long on Tuesday before returning to 20% net long on Wednesday.
Our QFC Political Seasonality Index strategy started the week in an aggressive position but shifted to a defensive position on Tuesday. (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 held a 60% net long exposure to the NASDAQ 100 throughout the week.
The Systematic Advantage strategy held a 120% net long allocation to the S&P 500 throughout the week.
Our QFC Self-adjusting Trend Following strategy’s primary signal began the week 160% net long the NASDAQ 100 before dropping to 0% net long on Monday. The signal moved to 200% net long on Wednesday and then moved to 100% net long on Friday.
The Volatility Adjusted NASDAQ, Systematic Advantage, QFC Self-adjusting Trend Following, and the QFC S&P Pattern Recognition strategies can use leverage, meaning their investment positions may exceed 100% at times.
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 Falling reading, which favors gold over bonds and then stocks from an annualized return standpoint. The combination has occurred 13% of the time since 2003. It is a stage of high risk for equities.