Current market environment performance of dynamic, risk-managed investment solutions.
By Daniel Poppe
Market snapshot
• Stocks: Stocks were lower last week.
• Bonds: The 10-year Treasury yield rose last week.
• Gold: Spot gold rose last week, closing above $3,300 an ounce.
• 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.
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Index summary
The major U.S. stock market indexes declined last week. The Dow Jones Industrial Average returned -2.43%, the NASDAQ Composite returned -2.45%, the S&P 500 returned -2.58%, and the Russell 2000 returned -3.45%. The 10-year Treasury bond yield rose from 4.43% to 4.51%. Spot gold closed the week up 4.80%.
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
The SPDR S&P 500 ETF (SPY), which tracks the performance of the S&P 500, finished the week above both its 50-day and 200-day moving averages.
Stocks have recovered from the April sell-off prompted by President Trump’s “Liberation Day” tariffs. The recent rally occurred against the backdrop of a rapidly shifting tariff landscape, with new measures frequently announced by the White House. Most recently, trade negotiations between the United States and China resulted in a reduction in tariffs on Chinese goods—from more than 100% to 30%. Talks between the U.S. and the European Union stalled but resumed after President Trump threatened a 50% tariff on EU goods.
Strong first-quarter corporate earnings have also likely supported the market. With nearly all S&P 500 companies having reported, FactSet’s Earnings Insight report shows a blended earnings growth rate of 12.9%. Most companies reported better-than-expected revenue and/or earnings. Valuations remain high, with the forward price-to-earnings ratio above both the five-year and 10-year averages.
Bonds
The iShares 7-10 Year Treasury Bond ETF (IEF), which tracks intermediate-term Treasury bonds, finished last week below its 50-day moving average but above its 200-day moving average.
Bonds have struggled since hitting a high in early April. Concerns are growing over the size and sustainability of U.S. federal debt. Rising rates may reflect efforts to attract buyers as confidence in U.S. debt weakens. On May 16, Moody’s became the last major U.S. ratings agency to downgrade the government’s credit rating from its highest level.
Fed funds futures suggest investors expect the Federal Reserve to hold interest rates steady at its June meeting. The Fed is balancing two key goals: keeping inflation in check and maintaining low unemployment rates. Tariff uncertainty may keep the Fed from cutting rates. The concern is that higher tariffs and lower rates could combine to push inflation up.
Gold
The SPDR Gold Shares ETF (GLD), which tracks the price of gold, finished the week above both its 50-day and 200-day moving averages.
Flexible Plan Investments (FPI) 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.
FPI’s indicators
The QFC S&P Pattern Recognition strategy’s primary signal started last week with a 30% net short exposure to the S&P 500. Exposure changed to 0% on Monday, 10% net short on Tuesday, 50% net long on Wednesday, 100% net long on Thursday, and 180% net long on Friday.
Our QFC Political Seasonality Index strategy started the week in a defensive stance, adopting a more aggressive posturing on Wednesday. (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.)
The Volatility Adjusted NASDAQ strategy started the week with 0% exposure to the NASDAQ 100, increasing to 20% net long on Wednesday.
The Systematic Advantage strategy began the week with a 90% net long exposure to the S&P 500, increasing to 120% net long on Monday.
Our QFC Self-adjusting Trend Following strategy’s primary signal was 200% net long the NASDAQ 100 throughout the week.
The Volatility Adjusted NASDAQ, Systematic Advantage, QFC Self-adjusting Trend Following, and QFC S&P Pattern Recognition strategies can all employ leverage, so investment positions may exceed 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.
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 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.
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 strong returns for gold.