Market insights and analysis

By Will Hubbard

Market snapshot

•  Stocks fell last week on continued recession fears.

•  Bond yields edged up slightly.

•  Gold remains strong in the face of economic uncertainty.

•  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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Equity markets broadly retreated last week. The S&P 500 fell 2.23%, the NASDAQ Composite lost 2.40%, the Dow Jones Industrial Average dropped 2.98%, and the small-cap Russell 2000 declined 1.45%. Bond yields rose, with the 10-year Treasury inching up from 4.30% to 4.31%. Gold briefly topped $3,000 an ounce before closing Friday at $2,984.16 per ounce.

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 investment landscape has become increasingly challenging as economic concerns intensify. The S&P 500 briefly entered correction territory, defined as a decline of 10% or more. Technology stocks, particularly within the NASDAQ, have led the market downturn. Nvidia, a current bellwether tech stock, fell more than 30% from its peak at one point.

Periods of market turbulence serve as a reminder that uncertainty and volatility are natural components of investing, even if recent years have been relatively stable. While downturns can be uncomfortable, they emphasize the importance of having a robust investment plan and risk-management process. One strategy we’ve highlighted this year is incorporating commodity trading advisors (CTAs) within actively managed portfolios. CTAs historically demonstrate a low correlation to traditional markets, which can help mitigate risk.

Recent economic data provides insight into why investors remain cautious. The University of Michigan Consumer Sentiment Survey fell to 57.9, down from 79.4 a year ago, and is now approaching its historic low of 50, recorded in mid-2022 when interest rates were rising rapidly (see the following chart). The decline is largely driven by concerns over the potential resurgence in inflation and the impact of recently announced tariffs on consumer spending.

Here are additional key economic indicators from last week:

•  Job openings came in at 7.74 million (slightly better than the anticipated 7.65 million).

•  The consumer price index (CPI) posted a month-over-month increase of 0.2% (better than the expected 0.3%), bringing the year-over-year value down to 2.8% (lower than the expected 2.9%).

•  The core producer price index (PPI) declined 0.1%, while the headline PPI remained flat.

•  Unemployment claims came in at 220,000 (roughly in line with the forecast of 226,000).

With the S&P 500 about 10% below its all-time highs, investors may see this as an opportunity to reevaluate portfolios to better manage economic uncertainty. If new policies drive strong market growth, conditions could turn bullish. On the other hand, if inflation rises while economic growth slows for multiple quarters, the economy could face stagflation. In this uncertain environment, actively managed approaches and risk-management tools like CTAs can provide valuable portfolio diversification, helping investors navigate shifting conditions while remaining invested in the markets.

Bonds

The 10-year U.S. Treasury yield rose from 4.30% to 4.31% last week, even as volatility persisted. According to LSEG data, short- and intermediate-dated U.S. Treasury funds saw substantial inflows compared to other fixed-income sectors. This shift coincided with a general decline in the U.S. dollar, creating an interesting dynamic where yields ticked up despite dollar weakness.

Investor demand for fixed income remains strong. Yields are still notably higher than they were five years ago, and with ongoing uncertainty, many investors appear to be asking, “Why take on market risk when I can earn around 4.30% for the year in a Treasury?”

Gold

Gold continued its impressive performance, gaining 2.58% to close at $2,984 per ounce after briefly surpassing $3,000 per ounce on March 14. Several factors are driving gold's strong performance:

•  Record demand levels

•  Significant geopolitical tensions

•  Economic instability

•  Increased acquisition by central banks

•  Ongoing trade tensions

•  Recession fears

These conditions have pushed investors toward gold as a safe-haven asset, a trend further supported by recent policy changes and economic uncertainties. Analysts are now projecting gold prices between $3,100 and $3,300 per ounce by the end of 2025, depending on sustained demand and the evolution of geopolitical risks.

Gold is also holding its own against bitcoin, which has been lauded as a store of value that is similar to but more efficient than gold. While bitcoin rallied hard to catch up with gold last week, the year-to-date picture still shows the nascent asset class is more tied to technology than it is to perceived risk-off investments.

Nontraditional investments, like gold and managed futures, continue to offer opportunities for diversification—especially if market volatility increases. Flexible Plan Investments 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.

The indicators

The QFC S&P Pattern Recognition strategy started last week 50% long, moved to 10% short on Monday, jumped to 20% long on Tuesday, increased to 70% long on Wednesday, moved down to 40% on Thursday, and ended the week at 50% long. Our QFC Political Seasonality Index remained in its risk-on posture for the week. (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.)

Our intermediate-term tactical strategies have been varied in their degree of defensive positioning. The key advantages these strategies offer to investors are their ability to adapt to changing market environments, participate during uptrends, and adjust exposure to more defensive posturing during downtrends.

The Volatility Adjusted NASDAQ (VAN) strategy started the week in its money market “cash” position. On Tuesday’s close, it moved to 20% short, where it remained for the week. The Systematic Advantage (SA) strategy started the week 90% long and reduced exposure to 60% long on Monday’s close. On Friday’s close, it increased exposure to end the week 90% long. Our QFC Self-adjusting Trend Following (QSTF) strategy started the week 200% long, moved to cash on Monday’s close, moved to an 80% long position on Wednesday, moved back to cash on Thursday, and went to 160% long on Friday’s close. VAN, SA, and QSTF can all use leverage, so the investment positions may exceed 100%.

Our Classic model was long risk-on positioning all 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 more restrictive platforms 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 equities.