Market Update 3/2/26

By Will Hubbard

Market snapshot

•  Equities: U.S. equities struggled last week on softer sentiment, geopolitical headlines, and renewed rate uncertainty. The S&P 500 fell 0.42%, the NASDAQ Composite lost 0.94%, the Dow Jones Industrial Average declined 1.28%, and the small-cap Russell 2000 decreased by 1.15%.

•  Fixed income: Interest rates fell as investors moved toward safety and priced in a greater likelihood of rate cuts. The benchmark 10-year Treasury yield dropped to 3.94%.

•  Gold and commodities: Gold gained 3.36%, and oil prices advanced amid renewed geopolitical concerns.

•  Market indicators and outlook: Our strategies remained broadly bullish, with most models in risk-on positioning and several using elevated exposure. Market regime indicators point to a Normal economic environment, 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

Stocks declined as investors weighed inflation data, labor market signals, and geopolitical developments.

The producer price index (PPI) was the key release. While consumer inflation has moderated, PPI came in firmer than expected, reminding markets that upstream pricing pressures have not fully disappeared. Persistent producer inflation can filter into consumer prices and corporate margins. The market reaction wasn’t dramatic, but it was enough to keep investors cautious about the pace of potential Federal Reserve rate cuts.

Weekly unemployment claims remain relatively contained, suggesting the labor market has not meaningfully deteriorated, though the recent uptick supports the broader narrative of gradual economic slowing. Concerns about automation and AI also resurfaced following significant workforce reductions at Block Inc. In announcing layoffs of 4,000 of its 10,000 employees, CEO Jack Dorsey said, “The core thesis is simple. Intelligence tools have changed what it means to build and run a company.”

Leadership remained narrow. Growth and technology stocks saw intermittent pressure, particularly when yields attempted to stabilize midweek. Financials were mixed, and small caps struggled to gain traction as investors remained selective.

The price action reflected consolidation rather than panic selling. Trading volumes were elevated at times, but there was no evidence of systemic stress. The pullback appeared consistent with digestion following an extended advance earlier in the quarter.

Equities remain near historically elevated levels. Markets at these levels often require either a clear acceleration in growth or a decisive move lower in rates to push to new highs. Without that confirmation, digestion periods are common.

Geopolitical developments also drew attention. Over the weekend, the United States and Israel conducted coordinated strikes in Iran that targeted military and infrastructure assets and resulted in the death of Iran’s supreme leader, Ayatollah Ali Khamenei. Iran responded with retaliatory actions in the region. The exchanges were described as calibrated rather than escalatory, but they renewed concerns about instability in the Middle East. As of Sunday evening, futures reactions were contained, though energy prices firmed as investors reassessed geopolitical risk.

Fixed income

Treasurys strengthened as equities softened. The 10-year yield fell from 4.09% to 3.94%.

Bond investors appear to be pricing in slower growth rather than a resurgence in inflation. While inflation remains above the Federal Reserve’s long-term target, the trajectory has improved, giving fixed-income markets room to breathe.

The front end of the yield curve remains sensitive to policy expectations. Investors continue to debate when the Federal Reserve may begin easing. While consensus still centers around midyear, confidence in that timing has fluctuated week to week based on incoming data.

Lower yields helped offset equity weakness and supported broader financial conditions. Credit spreads remain contained, suggesting that risk aversion has not spread into funding markets.

For now, bonds are behaving as they traditionally do during periods of equity hesitation, offering ballast rather than volatility. As active managers, we believe fixed income can be used both structurally and tactically—increasing and decreasing exposure as trends and market conditions warrant.

Gold and commodities

Gold advanced 3.36% during the week, supported by lower real yields and geopolitical tension. The metal remains sensitive to shifts in rate expectations. As Treasury yields declined, gold strengthened.

Energy markets were also firm. Oil prices were volatile but ended higher as geopolitical concerns resurfaced, particularly in regions central to global supply chains. Even modest changes in perceived supply risk can move energy markets quickly.

Recent commodity moves appear driven more by positioning and headlines than by structural shifts in demand. That does not invalidate the moves, but it does suggest that volatility may remain elevated.

During risk-off periods, gold often attracts incremental flows. As developments in Iran continue, demand for gold and other metals may persist. However, geopolitically driven moves tend to be reactive, underscoring the importance of maintaining a disciplined approach when volatility rises.

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 and ended the week 200% long. Our QFC Political Seasonality Index began 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, reduced exposure to 40% long on Tuesday’s close, returned to 60% long on Wednesday, and dropped back to 40% long on Friday’s close. The Systematic Advantage strategy started and ended the week 60% long. Our QFC Self-adjusting Trend Following strategy started the week 200% long, moved to cash on Tuesday’s close, and returned to 200% long on Wednesday’s close. 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 rate of return in Normal periods, while gold has ranked second but has 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 28% of the time since 2003.