Market insights and analysis

How dynamic, risk-managed investment solutions are performing in the current market environment

1st Quarter | 2024

Quarterly recap

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Current market environment performance of dynamic, risk-managed investment solutions.

By Daniel Poppe

Market snapshot

  • Stocks: Stock performance was mixed last week.
  • Bonds: The 10-year Treasury yield rose slightly last week.
  • Gold: Gold fell for the week, moving from above $2,400 an ounce to a bit above $2,300 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 Low and Falling, which favors stocks over gold and then bonds.

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The major U.S. stock market indexes were mixed last week. The NASDAQ Composite gained 1.42%, the S&P 500 rose 0.05%, the Russell 2000 returned -1.21%, and the Dow Jones Industrial Average returned -2.30%. The 10-year Treasury bond yield rose slightly. Spot gold closed the week down 3.37%.

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 well above both its 50- and 200-day moving averages.

Stocks appear to be increasing due to strong first-quarter earnings and a lower inflation reading for April. Almost all companies have reported earnings now. FactSet’s Earnings Insight report from May 24 shows earnings growth for the quarter was the best it has been since the first quarter of 2022, with most companies surprising to the upside. However, valuations are above historical averages. Despite the overall economy cooling in the first quarter, companies in the S&P 500 delivered strong earnings growth.

Bonds

The iShares 7-10 Year Treasury Bond ETF (IEF), which tracks intermediate-term Treasury bonds, finished above both its 50- and 200-day moving averages. Despite this, the ETF has seen a substantial year-to-date decline in price as rates have risen.

April inflation decreased from nearly 5% in March, suggesting that the higher inflation of the first quarter may have been a speed bump on the disinflationary path we’ve been following.

However, rates have remained elevated. Rates for two- to 10-year maturities have risen by more than 50 basis points this year. The yield curve remains inverted, with the 10-year yield 107 basis points below the two-month yield. An inverted yield curve usually portends a coming recession.

Market participants now expect no rate cut until November. The Federal Reserve will analyze incoming data until then to determine if inflation is stabilizing at a more normal level.

Gold

The SPDR Gold Shares ETF (GLD), which tracks the price of gold, has pulled back a bit from its May high but remains 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 10 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 started last week with an 80% net short exposure. Exposure changed to a 90% net short exposure on Wednesday. On Thursday, exposure changed to 10% net short. On Friday, exposure changed to 80% net long.

Our QFC Political Seasonality Index strategy was defensive throughout 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.)

The Volatility Adjusted NASDAQ strategy started the week with an exposure of 180% to the NASDAQ and increased exposure to 200% on Monday.

The Systematic Advantage strategy held a 90% allocation to the S&P 500 throughout the week.

Our QFC Self-adjusting Trend Following strategy was 200% long throughout last week.

The Volatility Adjusted NASDAQ, Systematic Advantage, QFC Self-adjusting Trend Following, and QFC S&P Pattern Recognition strategies can all employ leverage—hence the investment positions may at times be more than 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 Low and Falling reading, which favors equities over gold and then bonds from an annualized return standpoint. The combination has occurred 37% of the time since 2003. It is a stage of both high returns and low risk for equities.



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