Market insights and analysis

By Tim Hanna

Market snapshot

•  Stocks: Stocks rallied after the U.S. and China agreed to a 90-day reduction in tariffs, with all major indexes posting strong gains.

•  Bonds: The 10-year Treasury yield rose to 4.48%, while investment-grade and high-yield corporates outperformed Treasurys amid positive trade news.

•  Gold: Gold fell 3.65%, testing its 50-day moving average, as easing trade tensions reduced some investor 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 Falling. This regime favors gold over bonds and then stocks from an annualized return standpoint.

***

Index summary

The major U.S. stock market indexes were up last week. The S&P 500 increased by 5.33%, the NASDAQ Composite was up 7.21%, the Dow Jones Industrial Average gained 3.50%, and the Russell 2000 small-capitalization index rose 4.51%. The 10-year Treasury bond yield rose 10 basis points to 4.48%, taking Treasury bonds lower for the week. Spot gold closed the week at $3,203.65, down 3.65%.

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

Major indexes closed higher last week following a notable easing in the trade tensions between the U.S. and China. Starting last Wednesday, both countries agreed to a 90-day reduction in tariffs. The S&P 500 Index is now trading above its 50-day and 200-day moving averages, with both trending upward. Although a “death cross” (when the 50-day moving average crosses below the 200-day moving average) occurred in mid-April, continued positive momentum could make it short-lived.

All sectors posted gains for the week. Information Technology, Consumer Discretionary, and Communication Services each rose more than 6%. Health Care and Real Estate gained less than 1%, while Consumer Staples rose 1.56%.

As part of the 90-day tariff reductions, the U.S. lowered tariffs on Chinese goods from 145% to 30%, and China reduced tariffs on U.S. goods from 125% to 10%. The reductions were larger than expected but will expire in 90 days if a permanent deal is not reached. The markets reacted positively, fueling a broad rally that was partly driven by short covering and a fear of missing out on potential upside gains.

Over the past six weeks, earnings have generally exceeded expectations, and several trade policy reversals have occurred. Since the early April bottom, stocks have climbed steadily. The S&P 500 closed Friday around 3% from its all-time high and is now back in positive territory for the year.

Bespoke Investment Group analyzed mentions of tariffs on conference calls across the Russell 3,000 Index by sector. Tariff mentions were almost nonexistent less than a year ago. Since the November election, when the incoming Trump administration signaled changes to trade policy, mentions have surged.

Not surprisingly, about 45% of the mentions in May came from Industrial and Consumer Discretionary companies. Industrials rely heavily on raw materials and intermediate goods that are sourced globally. Many Consumer Discretionary companies are dependent on Chinese manufacturing for electronics, apparel, furniture, toys, and so on. 

 Although recent tariff news has lifted markets, a failure to reach a permanent deal could bring trade policy back to the forefront as the 90-day window nears its end.

Recent market strength has pushed the NASDAQ Composite out of bear market territory. It is now up more than 25% from its early April low. That bear market lasted from December 16, 2024, to April 8, 2025—a total of 76 trading days, or 113 calendar days. Historically, the median NASDAQ bear market has lasted 81 trading days, or 120 calendar days, with a median decline of 32.2%. This one saw a 24.3% decline, the fifth smallest of all 20 bear markets in the Index’s history. It took only 23 trading days for the NASDAQ to enter a new bull market (a gain of 20% off the recent low), close to the historical median and much faster than the recovery from the 2022 bear market low.

Bull markets have varied widely in length—from as short as 16 days to more than 2,388 trading days (over nine years). The median NASDAQ bull market has lasted around 300 trading days, or roughly 1.25 years.

Although some investors may worry the recent rally has moved too far, too fast, historical data suggests otherwise. On a median basis, the NASDAQ has gained an additional 30% one year after meeting the 20% rally threshold for a new bull market. Three-, five-, and 10-year annualized gains have also been in line with historical norms.

Given the market’s “turn on a dime” price action this year, incorporating dynamic investment strategies that can adjust to changing market conditions is critical for managing risk—especially during bear markets and periods of uncertainty. When market momentum is positive, many of our momentum-based strategies adjust to a more risk-on positioning. As 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.

While stocks have rallied since April, fixed-income markets have not followed suit. As market behaviors and asset-class relationships over the last few years have shown, it’s critical to incorporate dynamic investment strategies not only to stocks but also fixed income. The Quantified Managed Income Fund (QBDSX) is an actively managed income fund that dynamically allocates among income-producing assets, adjusts for duration and credit risk, and can move to cash when conditions warrant. The Fund plays a key defensive role in several of Flexible Plan Investments’ strategies. Year to date, the Fund is up 3.04%, compared with a 2.00% gain for the iShares Core U.S. Aggregate Bond ETF (AGG). During this period, the QBDSX has experienced less volatility and lower drawdown than aggregate bonds.

Bonds

The bond market fluctuated last week in response to economic data and trade news. The yield on the 10-year U.S. Treasury increased by 10 basis points to 4.48%. Investment-grade corporate bonds generated slight gains, outperforming Treasurys due to the risk-on environment. High-yield bonds also traded higher as equities rallied on encouraging trade news.

T. Rowe Price traders noted, “Municipal bonds outperformed Treasuries, although weakness in the Treasury market and a heavy issuance calendar weighed on the sector by the end of the week, leading to modestly negative returns through Thursday.”

Gold

Gold fell 3.65% last week, continuing to pull back from the highs set in late April. Last week’s sell-off saw support at the 50-day moving average. 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, though this latest one has shown the most resistance to resuming the upward trend so far.

Ongoing global uncertainty this year has made gold a popular asset, contributing positively to portfolios with gold allocations. We will have to wait and see whether easing trade tensions will pause the rally or potentially reverse the upward trend.

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, but another leg down could cause price to trade below the 50-day moving average.

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 0% exposure. Exposure changed to 20% long at Monday’s close, 0% exposed at Tuesday’s close, 20% short at Wednesday’s close, and 30% short at Thursday’s close. Our QFC Political Seasonality Index started the week in stocks, moved to defensive positioning at Monday’s close, and remained there 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 80% long exposure to the NASDAQ. Exposure changed to 0% at Tuesday’s close, where it remained to end the week. 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 0X exposure. The signal changed to 2X at Tuesday’s close, remaining there to end the 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 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.