Market insights and analysis

By Tim Hanna

Market snapshot

•  Stocks: Equity indexes posted strong gains last week, rebounding from earlier volatility driven by trade tensions and shifting tariff policy.

•  Bonds: The 10-year Treasury yield rose 49 basis points to 4.49%, a sharp move that may have influenced the White House’s decision to pause tariffs.

•  Gold: Gold rose 6.56% to another 52-week high, continuing to stand out amid global uncertainty and contributing positively to portfolios with gold exposure.

•  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. While this favors stocks over gold and then bonds, it is also a period of high risk for equities.

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The major U.S. stock market indexes were up last week. The S&P 500 increased by 5.73%, the NASDAQ Composite was up 7.30%, the Dow Jones Industrial Average gained 4.97%, and the Russell 2000 small-capitalization index rose 1.83%. The 10-year Treasury bond yield rose 49 basis points to 4.49%, taking Treasury bonds lower for the week. Spot gold closed the week at $3,237.61, up 6.56%.

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 major indexes closed higher last week following a volatile stretch. Markets opened sharply lower, continuing the previous week’s decline, before rallying midweek on news of a tariff pause. The S&P 500 Index continues to trade below its 50-day and 200-day moving averages and is nearing a “death cross” (when the 50-day moving average crosses below the 200-day moving average). The NASDAQ Composite experienced a death cross on Wednesday—more on that below. Despite volatility, the S&P 500 stayed above Monday’s low for the remainder of the week.

Sector performance was mixed: Information Technology, Industrials, and Communication Services each gained over 6.00%. Energy was the worst performer, down 0.39%, followed by Real Estate, which dipped 0.07%. All other sectors posted gains last week.

The market wavered early in the week amid continued uncertainty around new U.S. tariffs targeting multiple countries and the European Union. But on Wednesday, President Trump announced a 90-day pause on most tariffs (excluding those on China), triggering a massive relief rally. The S&P 500 surged 9.5% on Wednesday—its largest single-day gain since 2008—and the NASDAQ soared more than 12%. Markets gave back some gains on Thursday but rebounded over 1% on Friday.

Still, uncertainty remains high. China imposed retaliatory tariffs, U.S.–China relations remain tense, and consumer sentiment has declined. The University of Michigan’s preliminary reading of the April consumer sentiment index dropped to 50.8, its lowest level since June 2022. It marked the fourth consecutive monthly decline, driven by worsening expectations for business conditions and inflation amid the trade war.

Given the environment, it’s worth taking a look at historical data on volatility and forward returns. Bespoke Investment Group observed that being well below the 200-day moving average—currently in the third decile of all periods since 1928—doesn’t necessarily mean bad returns. Although that decile ranks lowest in terms of performance, the S&P 500 has still averaged more than 5% gains over the following year based on data going back to 1928. Rising credit spreads tell a similar story: Over the past month, spreads have risen at a 10th-decile pace, yet average forward one-year returns for the S&P 500 in similar cases have also been about 5%, as shown in the second chart below. 

Spikes in real yields—indicating dislocations in the Treasury market—haven’t historically provided strong signals for forward returns, but elevated volatility has. When the VIX (the market’s volatility index) is as high as it has been, forward returns have tended to be much stronger than average, especially compared to periods of lower volatility. 

Last week’s price action underscores just how extreme volatility has been. On Monday, the NASDAQ dropped over 4% during the day but managed to close in positive territory. On Tuesday, the reverse happened: The Index surged more than 4% intraday and closed lower. According to Bespoke, back-to-back swings of that size have never occurred before. The closest instance was in October 2008, when similar reversals reached around 3%. Then, on Wednesday, the NASDAQ Composite rallied over 12%—another extraordinary move in an already volatile week.

Midweek, the NASDAQ Composite experienced a death cross, with its 50-day moving average moving below its 200-day moving average. This marked the end of the fourth-longest streak in NASDAQ history—519 trading days—during which the 50-day average stayed above the 200-day average.

This was the NASDAQ’s 12th death cross since the early 1970s. Although this technical pattern is often seen as negative, historical data paints a more nuanced picture. In past cases, average and median forward returns over one-, three-, six-, and 12-month periods have typically been positive—and often stronger than average. However, the consistency of gains across those periods has been lower than normal, meaning positive outcomes occurred less frequently than usual.

As mentioned earlier, consumer sentiment has deteriorated significantly. While the University of Michigan’s consumer sentiment current situation assessments have been fairly stable over the past year, recent data has shown a sharp decline. Expectations have also continued to fall. For example, 68% of households now anticipate a decline in real income over the next one to two years—the highest percentage recorded in the survey’s history. For context, the previous record was 57%, set during the summer of 2008 when gas prices spiked.

Given the market volatility, weakening sentiment, and ongoing geopolitical uncertainty, incorporating dynamic investment strategies that can adjust to changing market conditions is critical for managing risk—especially during prolonged bear markets and periods of heightened volatility. 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 mean-reversion methodology is the Quantified Pattern Recognition Fund (QSPMX), which dynamically trades the S&P 500, identifying and using mathematical patterns within the market to determine exposure. It has the flexibility to adjust its position daily, ranging from 100% inverse to 200% long. The Fund is used within some of our QFC strategies and can be used in our turnkey solutions. Within our more customizable turnkey QFC Multi-Strategy Core and Explore solution, QFC Multi-Strategy Explore: Special Equity is currently weighted heavily to the QFC S&P Pattern Recognition Fund, second only to its overweight allocation to defensive positions. The following chart shows the year-to-date performance of the Quantified Pattern Recognition Fund (QSPMX, 0.00%) compared to the SPDR S&P 500 ETF (SPY, -8.48%).

Bonds

The bond market saw heightened turbulence last week, with U.S. Treasury yields rising sharply. The yield on the 10-year U.S. Treasury increased by 49 basis points to close at 4.49%. This spike fueled anxiety across asset classes and may have influenced the White House’s decision to pause tariffs in an effort to avoid exacerbating inflation risks.

T. Rowe Price traders noted, “Investment-grade corporate bonds also posted negative returns and underperformed Treasuries. … New issue supply in the investment-grade corporate market was well below weekly expectations, though issues were generally oversubscribed. … High yield bonds performed well on Wednesday following President Trump’s 90-day pause on tariffs, although the asset class came under pressure along with the move in equities and rates as sentiment turned negative later in the week.”

Gold

Gold rose 6.56% last week, closing at another new 52-week high. Since breaking out of its consolidation pattern in mid-January (see the black lines on the following chart), gold has maintained a strong upward trend. Pullbacks have been brief, with bullish momentum continuing to drive prices higher. Ongoing uncertainty across global markets has made the metal a go-to asset for many, contributing positively to portfolios with gold allocations.

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. Gold remains above both moving averages, which are still trending upward.

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 30% long exposure. Exposure changed to 80% long at Monday’s close, 120% long at Tuesday’s close, 130% long at Wednesday’s close, 0% at Thursday’s close, and 20% long at Friday’s close. Our QFC Political Seasonality Index favored stocks throughout last 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 40% short exposure to the NASDAQ. Exposure changed to 80% short at Thursday’s close where it remained to end the week. The Systematic Advantage (SA) strategy is 30% exposed to the S&P 500. Our QFC Self-adjusting Trend Following (QSTF) strategy signal was 0X exposed throughout last week. The QFC Dynamic Trends (QDT) strategy remained invested in the Quantified STF Fund (QSTFX) last week. FlexPlan Strategic, our new A shares offering available in self-directed brokerage accounts (SDBAs), maintained overweight allocations to the Quantified STF Fund (QSTAX) and Quantified Eckhardt Managed Futures Fund (QETAX) for the aggressive risk profile. For the conservative risk profile, the strategy was overweight to the Quantified Managed Income Fund (QBDAX) and Quantified Eckhardt Managed Futures Fund (QETAX). The strategy offers five risk profiles to meet different investor needs. Note that 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 Rising reading, which favors equities 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 lower returns and higher volatility for all three major asset classes.