Market insights and analysis

By Tim Hanna

Market snapshot

•  Stocks: Equity indexes saw mixed performance last week due to concerns about growth and policy risks. The Dow Jones Industrial Average was the only major index to gain for the week.

•  Bonds: The yield on the 10-year Treasury fell by 22 basis points to 4.21%. Rates continued to pull back last week, with gains attributed to last week’s generally disappointing economic data.

•  Gold: Gold fell 2.66% last week after reaching a new 52-week high on Monday. The golden cross remains in play, with both the 50-day and 200-day moving averages trending upward and price holding well above both.

•  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 from an annualized return standpoint.

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The major U.S. stock market indexes were mixed last week. The S&P 500 decreased by 0.95%, the NASDAQ Composite was down 3.45%, the Dow Jones Industrial Average gained 1.01%, and the Russell 2000 small-capitalization index fell 1.44%. The 10-year Treasury bond yield fell 22 basis points to 4.21%, taking Treasury bonds higher for the week. Spot gold closed the week at $2,857.83, down 2.66%.

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

Most stocks declined for a second straight week, as growth concerns and policy risks weighed on the market. The NASDAQ Composite had its worst week since September, with technology stocks leading the decline. Investors are worried about ongoing regulatory uncertainty and that the artificial intelligence rally may be slowing. After Nvidia’s highly anticipated earnings report, the stock fell almost 8.5% on Thursday.

Tariff concerns also contributed to market weakness. President Trump announced that tariffs on Mexico and Canada, along with an additional 10% tariff for China, will take effect March 4—a month earlier than originally planned. Reports also suggest that a 25% tariff on the European Union may be announced soon.

The S&P 500 index is now trading below its 50-day moving average, with mid-February highs failing to hold.

Sector performance varied: Financials, Real Estate, and Health Care each gained over 1.50%. Information Technology struggled the most, losing more than 4.00%. Communication Services and Consumer Discretionary followed with losses of over 2.00%.

On the geopolitical front, President Trump and Ukrainian President Zelenskyy had a heated exchange in the Oval Office on Friday. Trump stated that Zelenskyy is “gambling with World War III.” Shortly after, the Ukrainian president left the White House. The expected rare earths deal was not signed, and remaining meetings were canceled.

Investor concerns over economic and political uncertainty are growing. Bespoke Investment Group found that tariffs have become a dominant topic in U.S. corporate earnings calls.  Its research showed that in February alone, there were over 2,000 mentions of tariffs on earnings calls, according to a Bloomberg search.

Job cuts are adding to market worries. Originally tied to the Department of Government Efficiency (DOGE) initiative, layoffs have now expanded. According to Bloomberg, the Office of Personnel Management instructed agencies to prepare plans for “large-scale reductions in force.” The combination of frozen payments, tariff dynamics, and federal firings is driving a surge in economic policy uncertainty. Bespoke noted that since 1985, the only time uncertainty was higher was during the 2020 COVID shock. Even crises like 9/11, the 2008 financial crisis, and the 2011 U.S. debt downgrade had lower levels of uncertainty.

Recent consumer confidence data also caught investors’ attention. Tuesday’s report from The Conference Board showed that consumers are feeling much more pessimistic about the future. The percentage of respondents who see job market conditions worsening hit its highest level since 2012. Meanwhile, the share of consumers expecting business conditions to decline jumped to its second-worst level since 2009. Inflation expectations also spiked.

While current economic conditions are not as bad, perceptions of jobs and business conditions remain weaker than pre-COVID levels. Bespoke noted the previous week that political partisanship is affecting consumer confidence data, particularly the University of Michigan survey. While political bias may be skewing responses, negativity is still negativity—and the data suggests that growing concerns could be impacting consumer spending. In fact, January’s consumer spending drop was the largest since 2021.

Concerns over slowing growth were reinforced by the Atlanta Fed’s GDPNow model, which showed a sharp decline in its first-quarter growth estimate—falling from +2.3% to -2.8% in the latest model update on March 3. This was the largest single update drop since May 2020, when the data was incorporating the COVID shock. The change was driven by trade data, as the U.S. goods trade deficit widened from $122 billion to $153 billion, far worse than the $117 billion expected. Industrial supplies drove the move, rising by $22 billion (33%) month over month. All other categories rose $13 billion (6%). Since November, industrial supplies imports are up 58%, as companies hurry to secure materials before tariffs take effect.

When market momentum is positive, many of our momentum-based strategies adjust to a more risk-on positioning. If prices continue to rise, systematic trend-following algorithms are designed to identify and participate in the upward price momentum. Conversely, if volatility arises and prices decline, systematic momentum strategies are designed to identify the change and move to more defensive positioning. Mean-reversion strategies attempt to recognize and navigate sideways market conditions, offering an uncorrelated complement to momentum-based programs, which face challenges during trend-reversal inflection points.

One such systematic momentum methodology is the Quantified Evolution Plus Fund (QEVOX). The Fund dynamically trades between global equities, bonds, and alternatives, identifying trends in assets within its universe, with the flexibility to adjust its positions weekly. The Fund is used within some of our QFC strategies, including our QFC Evolution Plus strategy, and can be used in our turnkey solutions. The following chart shows the one-year performance of the Quantified Evolution Plus Fund (QEVOX, 19.13%) compared to one of the world’s largest multi-asset global allocation mutual funds, the BlackRock Global Allocation Fund (MALOX, 9.08%).

Bonds

Last week, the 10-year Treasury yield fell 22 basis points, closing at 4.21%. Yields have pulled back significantly from their mid-January peak. Currently, the 10-year Treasury sits midway between its September low (when yields began rising after the rate cut—the black line on the following chart) and its January peak. Treasury gains were attributed to weak economic data.

T. Rowe Price traders noted, “U.S. Treasuries generated positive returns heading into Friday amid the week’s generally disappointing economic data. Treasury yields were lower across most maturities through Thursday, and intermediate-term yields had declined more than short- and longer-term yields. … Municipal bonds generated positive returns but largely underperformed Treasuries. … New muni issuance was well absorbed and mostly oversubscribed.”

Gold

Gold fell 2.66% last week, though it set a new 52-week high on Monday. The yellow metal looks to be pulling back after a prolonged uptrend, following its breakout from a consolidation pattern in mid-January (black lines on the following chart).

The “golden cross” (when the 50-day moving average crosses above the 200-day moving average) remains in play. This formation is typically seen by technicians as a bullish longer-term trend signal. Despite last week’s pullback, gold remains above the moving averages, both of which are still positively sloped.

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 in a more tax-efficient manner than its ETF counterpart, GLD. The Fund is used within some of our QFC strategies (such as our QFC TVA Gold) and can be used within our more customizable turnkey solutions, such as our QFC Multi-Strategy Core and Explore offerings.

The indicators

The very short-term-oriented QFC S&P Pattern Recognition strategy started last week with 90% long exposure. Exposure changed to 120% long at Monday’s close, 130% long at Wednesday’s close, and 90% long on Friday’s close. Our QFC Political Seasonality Index favored defensive positioning until Tuesday’s close, when it moved into stocks and held that position for the rest of 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 last week with 120% long exposure to the NASDAQ. It changed exposure to 100% long at Monday’s close and lowered exposure to 40% long at Friday’s close. The Systematic Advantage (SA) strategy is 90% exposed to the S&P 500. Our QFC Self-adjusting Trend Following (QSTF) strategy signal started last week with 200% long exposure, changed to 0% at Monday’s close, changed to 200% long at Wednesday’s close, changed to 0% at Thursday’s close, and changed to 100% long exposure at Friday’s close. The QFC Dynamic Trends (QDT) strategy was invested in the Quantified STF Fund (QSTFX) throughout last week. VAN, SA, QSTF, and QDT can use leverage, which can result in investment positions exceeding 100%.

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.

Flexible Plan’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 the inflation rate and a positive monthly GDP reading). 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. From a risk-adjusted perspective, Normal is one of the best stages for stocks, with limited downside.

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 higher returns and lower volatility for bonds relative to the other volatility regimes.