Market Update 4/13/26

By Will Hubbard

Market snapshot

•  Equities: Equities posted a strong week overall, but by Friday the tone shifted as investors weighed a hotter inflation backdrop against still-fragile geopolitical developments in the Middle East. The S&P 500 gained 3.58%, the Dow Jones Industrial Average rose 3.07%, the NASDAQ Composite climbed 4.68%, and the small-cap Russell 2000 advanced 3.99%.

•  Fixed income: The benchmark 10-year Treasury yield rose slightly to 4.32% for the week.

•  Gold and commodities: Energy sold off on hopes of easing geopolitical tensions in the Middle East. Gold gained 1.56% as the U.S. dollar weakened.

•  Market indicators and outlook: Our strategies were not very active last week, with minimal trading and generally low exposures. 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

Last week’s U.S. economic data painted a mixed picture from a macro standpoint. The ISM Services PMI came in at 54.0 versus the expected 54.8, showing that the service side of the economy is still expanding, though at a slower pace. Private-sector employment added 62,000 jobs in March, according to ADP. The durable goods report was mixed: Core durable goods were up 0.8%, while headline durable goods fell 1.4%. Meanwhile, the minutes from the Federal Open Market Committee’s March 17–18 meeting reinforced that the Fed is still closely watching inflation and the broader macro outlook.

The March consumer price index (CPI) showed inflation is still running hot. CPI rose 0.9% month over month and 3.3% year over year, while core CPI increased 0.2% month over month. At the same time, the University of Michigan’s preliminary consumer sentiment fell to 47.6, and inflation expectations rose to 4.8%.

In our view, that combination matters because it helps explain why equities rallied last week. Oil prices fell sharply, and investors leaned into the idea that a ceasefire framework with Iran might reduce some of the immediate pressure on growth and inflation. But the data also showed that inflation is still not comfortably behind us, especially with energy remaining such a large swing factor. In other words, the market enjoyed some relief, but it did not gain much clarity.

That keeps the equity backdrop a little more balanced than euphoric. Investors were willing to look past hotter headline inflation because energy prices eased and hopes grew that the worst of the geopolitical shock might be behind us. Still, soft sentiment, firmer inflation, and ongoing uncertainty around the Strait of Hormuz suggest caution. As of this writing, the situation has shifted again, with the U.S. launching its own blockade of Iran’s blockade. Still, the market is currently digesting this information and taking it in stride.

These geopolitical tensions are unfolding at a time when equity valuations are quite stretched. Bespoke Investment Group noted that the average Shiller P/E ratio by decade is currently at its highest level. While this doesn’t mean a correction, recession, or bear market is imminent, it does suggest that equities could face a tough patch without much of a spark.

For investors, the key question is how to manage that risk. Passive investments tend to do well during sustained uptrends, such as from the 2010s through today, but preparing for more volatile conditions is important. Having a plan in place before markets turn can help investors avoid emotional decisions when volatility rises.

Fixed income

Treasurys were choppy last week, but yields ultimately moved slightly higher as investors worked through stronger inflation data and modest demand at longer-dated auctions. The 10-year Treasury yield started the week around 4.31% and finished Friday near 4.32%, with yields climbing after the CPI report.

That reaction makes sense when you look at the macro data. Core personal consumption expenditures increased by 0.4% month over month, CPI rose 0.9% month over month and 3.3% year over year, personal income unexpectedly fell 0.1%, and final fourth-quarter GDP came in at 0.5% versus the expected 0.7%. So, the bond market had to absorb a mix of still-sticky inflation and somewhat softer growth. That is not the kind of backdrop that gives fixed income a clean, obvious direction.

For now, bonds still look capable of providing some stability, but they are not behaving like a perfect hedge. When inflation data runs hot, especially with energy driving much of the move, yields can still rise even if growth is slowing beneath the surface.

Our concern remains the same: The risk is not that bonds stop mattering, but that they have a harder time delivering immediate ballast when inflation fears or economic turmoil rise again. If oil remains volatile and the equity market continues to rethink how many Fed cuts are realistically left this year, fixed income may still offer some defense, just not always on the timetable investors would prefer.

Gold and commodities

Commodities calmed somewhat last week, at least compared with the sharp moves seen earlier. Oil was again the main story, but not for the same reason. Brent crude settled at $95.20, down more than 12% for the week. The decline followed optimism around a temporary U.S.–Iran ceasefire arrangement and hopes that tensions in the region might ease, even though conditions around the Strait of Hormuz remained unsettled.

Gold held up better than it had in prior weeks, closing the week at $4,749.75 per ounce, up 1.56%. That is notable because gold previously struggled against a stronger dollar and higher real yields. Last week, a weaker dollar and a more cautious view of the ceasefire’s durability helped support prices.

The bigger takeaway is that commodities are still doing most of the macro talking right now. Oil remains the more direct channel for inflation pressure, while gold is reacting more to the second-order effects through the dollar, rates, and broader investor confidence. If oil continues to cool, that may relieve some pressure on inflation expectations.

From our perspective, gold still makes sense as a diversifier, but last week was another reminder that it does not move in a vacuum. Gold can benefit from uncertainty, but it also has to contend with real yields, Federal Reserve expectations, and dollar strength. In other words, it can still help in a broader allocation, but investors should not expect it to respond to every geopolitical headline in a straight line.

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’s primary signal started the week 60% long, cut exposure to 10% long on Tuesday, shifted to 40% short on Thursday, and further reduced exposure to 90% short on Friday’s close. Our QFC Political Seasonality Index maintained a risk-on posture throughout the week. (Our 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 and ended the week 20% long. The Systematic Advantage strategy started the week 60% long, then reduced exposure to 30% long at Thursday’s close and remained there through the end of the week. Our QFC Self-adjusting Trend Following strategy started and ended the week in cash. 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 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 75% of the time since 2003 and has been a positive regime state for stocks, bonds, and gold. Stocks have the highest rate of return in Normal periods. Gold has the second-highest return but has also experienced high drawdown in these environments.

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.