Market insights and analysis

By Will Hubbard

Market snapshot

•  Stocks saw their best week since early March on jobs strength, tech earnings, and easing trade concerns.

•  Bond yields climbed as strong jobs data prompted a shift from safe havens to equities.

•  Gold pulled back last week as risk appetite returned, but technical support remains strong.

•  Market indicators and outlook: Strategy positioning varied, with many strategies reducing shorts and moving into more long-focused positioning. 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.

Equity markets rallied last week, extending a nine-day winning streak—the longest since April 2009. The S&P 500 rose 2.94%, the NASDAQ Composite rose 3.43%, the Dow Jones Industrial Average advanced 3.00%, and the small-cap Russell 2000 added 3.24%. Meanwhile, the 10-year Treasury yield climbed from 4.24% to 4.31%, and gold fell 2.39%.

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Stocks

Last week’s rally was driven by resilience in the labor market, easing concerns over tariffs, and strong tech earnings. Friday’s gains followed a better-than-expected April jobs report, which showed nonfarm payrolls increasing by 177,000 and the unemployment rate holding steady at around 4.2%. Big tech firms like Microsoft and Meta also posted strong earnings surprises, lifting investor sentiment.

Meanwhile, the White House’s apparent shift toward more moderate policy positions—including potential tariff relief—has further contributed to the market’s upward momentum. The rally reflects optimism that the economic fallout from trade policies may be less severe than previously feared.

Other key economic data from last week included the following: 

•  Job openings: The number of job openings fell to 7.19 million, below the expected 7.49 million. 

•  Consumer confidence: The Conference Board’s index dropped from 92.9 in March to 86.0 in April, falling short of the expected reading of 87.7. 

•  Jobs outlook: According to Stephanie Guichard, a senior economist at The Conference Board, 32.1% of consumers expect fewer jobs in the next six months—a level close to April 2009 during the financial crisis. This decline in job expectations was a key factor behind the drop in consumer confidence. 

•  Advance Q1 GDP: The first estimate of Q1 GDP showed a decline of 0.3%, compared to expectations of a 0.2% increase.  

•  Core personal consumption expenditures (PCE): Core PCE was flat for the month, missing the expected 0.1% increase.  

•  ISM Manufacturing Purchasing Managers’ Index (PMI): The manufacturing index came in at 48.7, remaining below the 50 level that signals expansion.

Although year-to-date economic data hasn’t been all that bad, April felt turbulent for many investors. Much of that volatility has been driven by political rhetoric and shifting investor sentiment. According to Bespoke Investment Group, the four days following “Liberation Day” showed the highest average daily volatility since the 1987 market crash—exceeding even the early COVID lockdown period.

Bespoke’s research team found that when four-day volatility exceeds 4%, forward returns for the S&P 500 have been historically strong—averaging 21% over the following year, excluding the global financial crisis.

For investors, the takeaway is that staying nimble and dynamic in this market is extremely important. But that doesn’t mean going to cash and sitting on your hands. It means understanding what you own and why you own it, and then making thoughtful decisions to manage both risk and opportunity going forward.

Bonds

In fixed-income, the benchmark 10-year Treasury rose to 4.31% by Friday’s close, pushing bond prices lower for the week. The move reflects a rotation out of safe-haven assets and into equities following the strong U.S. labor report. Short-term yields also rose, though to a lesser extent.

Overall, yields have started to normalize somewhat. However, short-term rates remain elevated as investors continue to expect rate cuts from the Federal Reserve later this year.

According to the CME FedWatch tool, 37% of investors anticipate a year-end federal funds target range of 3.50% to 3.75%. The current target range is 4.25% to 4.50%.

The bottom line for fixed-income investors is that rates are likely to come down. Whether it’s to the 3.50% to 3.75% range is yet to be seen. Taking advantage of current yield spreads—or at least having a plan to adjust credit and duration exposure—could prove beneficial.

Gold

Gold slid 2.39% last week, falling from recent highs to close at $3,240.49 per ounce. The decline was largely due to rising risk appetite, as the initial shock from tariff announcements faded and investors began adjusting their expectations for the future.

According to USAGOLD, the yellow metal is currently in a consolidation phase after gaining more than 26% for the year. Technical analysis indicates support near $3,180 per ounce and resistance at around $3,350.

Looking ahead, gold and other alternative investments, such as managed futures, may offer opportunities should market volatility increase. 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.

The indicators

The QFC S&P Pattern Recognition strategy started last week 10% short. It moved to 20% short on Monday, increased to 30% short on Tuesday, and moved to a neutral cash position on Friday. Our QFC Political Seasonality Index remained in its risk-on posture for 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 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 the week 40% short, reduced its short exposure to 20% on Monday, and moved to an all-cash position on Friday. Our Systematic Advantage (SA) strategy started the week 60% long, moved to a 90% long position on Monday’s close, and took profit and reduced back to 60% long on Friday. Our QFC Self-adjusting Trend Following (QSTF) strategy started the week 100% long, moved to an all-cash position on Thursday, and shifted to a 200% long position on Friday’s close. VAN, SA, and QSTF can all employ leverage, so investment positions may sometimes exceed 100%.

Our Classic model was long risk-on positioning all 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 more restrictive platforms 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 Rising reading, which favors stocks 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 high risk for equities.