Market Update 2/17/26

By Will Hubbard

Market snapshot

•  Equities: The S&P 500 lost 1.35%, the NASDAQ Composite dropped 2.08%, the Dow Jones Industrial Average declined 1.15%, and the small-cap Russell 2000 fell 0.85%.

•  Fixed income: The benchmark 10-year Treasury yield fell to around 4.05% from 4.21% on better-than-expected inflation numbers.

•  Gold: After a brief midweek pullback, gold prices rose 1.56% to end the week at $5,042.04 per ounce.

•  Market indicators and outlook: Our strategies were broadly bullish. Most maintained risk-on or long positioning, with some levered strategies using most or all of their available leverage. Market regime indicators show the market is in a Normal economic environment, 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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Equities

It was a rough week for stocks. The S&P 500 dropped 1.35% to close at 6,836, leaving it about 2% below its late-January high. Thursday did most of the damage, as a wave of selling hit tech and growth names hard.

A few things came together at once. Alphabet’s earnings call spooked investors after the company projected as much as $185 billion in AI-related capital spending for 2026. That’s a big number, and it raised fresh questions about whether all of this AI investment will pay off anytime soon. Software stocks got hit particularly hard on worries that AI tools might start eating into their businesses. Retail sales were also muted, with no change for the month. Analysts had forecast a 0.3% increase in core retail sales and a 0.4% rise in the headline figure.

Earlier in the week, the mood was more positive. The Dow crossed 50,000 for the first time, and Wednesday’s jobs report came in hot—130,000 new jobs versus the 66,000 Wall Street expected. Health care and construction led the hiring. But by Thursday, none of that mattered. The Russell 2000 fell about 2% in a single session.

Friday brought some relief. January’s inflation report showed prices rising just 2.4% year over year, the slowest pace since May and better than the 2.5% economists expected. Core inflation fell to 2.5%, its lowest since early 2021. That helped calm nerves a bit, and stocks stabilized heading into the long weekend.

Equities remain near all-time highs and appear to be searching for a reason to break through the current ceiling. Traders are looking for confirming signals that the bull market remains intact.

Fixed Income

Bonds had a good week as investors sought safety. The 10-year Treasury yield fell to 4.05% by Friday, its lowest level since early December and down from 4.21% at the start of the week.

The move made sense given what was happening elsewhere. Stocks were selling off, and the economic data was softer than expected, broadly speaking. December retail sales came in flat, missing expectations, and existing home sales posted their largest decline since 2022. Wednesday’s stronger jobs report pushed yields up briefly, but that didn’t last.

Friday’s Consumer Price Index report really moved the needle. With inflation coming in cooler than expected, traders started pricing in more rate cuts for this year. Most expect the Federal Reserve to hold steady until June, then start cutting.

There’s still a lot of uncertainty around Fed policy. Kevin Warsh takes over as chair in May, and he’s been vocal about shrinking the Fed’s balance sheet. But he’s also hinted at working with the Treasury to bring yields down. How that plays out is anyone’s guess. For now, cooler inflation and softer growth data are supporting demand for Treasurys.

Gold and commodities

Gold remains volatile. After spending much of the week recovering from January’s historic sell-off, the metal got caught up in Thursday’s broad market rout. It touched a low near $4,871 before bouncing back to close around $5,042, up 1.56% for the week.

January’s crash is still fresh. Gold peaked near $5,600 earlier this year before plunging 11% in a single day on January 30, its largest one-day drop since the early 1980s. Silver fell even harder, down 36% in one session. Prices have stabilized since then, but traders appear to be more sensitive to sharp moves, and volatility remains elevated.

Thursday’s drop wasn’t really about gold specifically. It was part of the broader risk-off move as tech stocks cratered. Silver fell more than 11% before recovering some ground. When everything sells off together like that, it’s usually about positioning and liquidity, not fundamentals.

The bigger picture still looks supportive for gold. Central banks keep buying—China extended its gold purchases for a 15th straight month in January. Rate cuts are coming eventually, and geopolitical risk isn’t going away. But after moves this dramatic, expect more chop before things settle down.

Flexible Plan Investments (FPI) is the subadviser to the only U.S. gold mutual fund, The Quantified Gold Futures Tracking Fund, formerly The Gold Bullion Strategy Fund. 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

The QFC S&P Pattern Recognition strategy started the week 190% long, scaled back to 180% long on Monday, and increased back up to 190% long on Friday. Our QFC Political Seasonality Index started the week in its risk-off posture, switching to its risk-on posture on Thursday. (The 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 60% long, decreased exposure to 40% long on Tuesday’s close, moved back to 60% long on Wednesday, and dropped back to 40% long on Friday’s close. The Systematic Advantage strategy was 60% long throughout the week. Our QFC Self-adjusting Trend Following strategy remained 200% long for the week. These strategies can employ leverage, so their exposure may exceed 100% at times.

Our Classic model was 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, defined by positive monthly changes in both prices and GDP. A Normal environment has occurred 75% of the time since 2003 and has been positive for stocks, bonds, and gold. Stocks have delivered the highest returns in Normal periods, while gold has ranked second but also experienced high drawdowns.

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.