Market Update 6/1/26

By Will Hubbard

Market snapshot

•  Equities: Broad-based equity indexes finished higher for the week, with technology leadership again carrying the major averages to record territory. The S&P 500 gained 1.44%, the Dow Jones Industrial Average rose 0.91%, the NASDAQ Composite climbed 2.39%, and the small-cap Russell 2000 added 1.77%.

•  Fixed income: Interest rates moved lower this week as hopes for progress in the U.S.-Iran conflict helped ease some inflation concerns, though rates remain highly sensitive to oil prices. The benchmark 10-year Treasury yield finished the month near 4.44%, down roughly 12 basis points for the week.

•  Gold and commodities: Gold finished modestly higher for the week after a late-week bounce, while oil remained the more important macro story. Gold ended May at $4,540.26 per ounce, while Brent crude settled near $92 per barrel after falling late in the week on hopes for an extension of the U.S.-Iran truce.

•  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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Equities

The equity market continued to climb the wall of worry last week, as it has for much of the spring. The S&P 500 finished higher for the ninth week in a row and closed May in record territory.

Leadership was again heavily influenced by technology and AI-related names. Dell Technologies rose 30% on earnings, showing that companies able to connect the AI story to revenue, earnings, and forward guidance continue to attract investor attention.

At the same time, economic data remained mixed. April personal consumption expenditures (PCE) inflation rose 3.8% from a year earlier, while core PCE climbed 3.3%. Both remain well above the Federal Reserve’s 2% target. Consumer spending increased 0.5% in nominal terms, but real PCE rose only 0.1%. That suggests households are still spending, but inflation is accounting for much of the increase in the headline numbers. Initial jobless claims rose to 215,000 in the week ending May 23. That is still low by historical standards, but it is a reminder that the labor market is no longer as tight as it was.

The equity market is balancing two ideas. The first is that the economy is still growing, corporate earnings remain resilient, and AI-related capital spending continues to create opportunities. The second is that inflation is not fully contained, oil prices remain a major swing factor, and the Fed has little room to declare victory.

For investors, this is where process matters. A rules-based approach does not need to predict every headline out of Washington, Tehran, the Fed, or the Technology sector. It simply needs to respond to what the market is actually doing. Right now, the market continues to reward growth and momentum, but risks below the surface make it important to have a plan for changing conditions.

Fixed income

Treasurys had another choppy week, but yields moved lower. The 10-year Treasury yield finished May near 4.44%, down roughly 12 basis points for the week. That move was largely tied to the same issue driving commodities: whether the U.S.-Iran conflict would continue to pressure oil prices and inflation expectations, or whether some form of truce could reopen supply routes and take pressure off energy markets.

The bond market is trying to digest a difficult mixture of data. Inflation is still too high, with PCE running above the Fed’s target. Consumer spending remains positive, but real income and real spending data suggest household pressure is building. The labor market is not breaking, but it is also not as tight as it was. In that environment, each new inflation report, labor report, and oil headline can move rate expectations.

This mix of data highlights why we think bonds continue to have a role in portfolios. But investors should be careful about assuming they will always provide a smooth offset to equity volatility. The experience of 2022 is still a reminder that fixed income can become a source of volatility when inflation and rates are moving in the wrong direction. We are not coming off a zero-interest-rate policy today, which changes the environment. But the message is similar: Fixed income can diversify risk, but it still needs to be managed and adaptive to the current market regime.

Gold and commodities

The war in Iran continued to keep Brent crude top of mind for investors. Brent crude finished the week near $92 per barrel after hopes for a potential extension of the U.S.-Iran truce helped ease some concerns about supply disruptions.

Gold remained firm late in the week, ending May at $4,540.26 per ounce. Gold was still down for the month, but the late-week rebound showed that investors continue to view it as a hedge against uncertainty, even if higher real rates and a stronger dollar can create periodic headwinds.

From our perspective, gold still makes sense as a diversifier. But last week was another reminder that it is not a magic asset. It can benefit from uncertainty, but it can also come under pressure when rates or the dollar move higher.

FPI is the subadviser to the only U.S. gold mutual fund, the Quantified Gold Futures Tracking Fund (QGLDX). Launched in 2013, the fund is designed to track the daily price changes in the precious metal in a more tax-efficient manner than its ETF counterpart, GLD.

The indicators

QFC S&P Pattern Recognition strategy started the week 50% long, then moved to cash on Tuesday. On Wednesday, it increased to 70% long before moving to 90% on Thursday. It then scaled back to 30% long to close the week.

Our QFC Political Seasonality Index spent the week in its risk-on posture. (The QFC Political Seasonality Index—with all of the daily signals—is available after login in our Weekly Performance Report section under the Domestic Tactical Equity category.)

Our intermediate-term tactical strategies varied in their degree of defensive positioning. The key advantage these strategies offer investors is their ability to adapt to changing market environments—participating during uptrends and moving to a defensive posture during downtrends.

The Volatility Adjusted NASDAQ strategy started the week 40% long and moved to 60% long on Tuesday’s close. It dropped back to 40% long on Wednesday’s close and ended the week at 60% long after increasing exposure on Thursday’s close. The Systematic Advantage strategy started the week 120% long and increased exposure to 150% long on Tuesday’s close. It dropped back to 120% long on Friday’s close to end the week. Our QFC Self-adjusting Trend Following strategy spent the week in cash. These strategies can employ leverage, so their exposure may exceed 100% at times.

Our Classic model was fully “risk-on” all week. Most Classic accounts follow a signal that can change exposure within a week, though a few remain on platforms requiring up to a month to adjust to new signals.

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 75% of the time since 2003 and has been a positive regime state for stocks, bonds, and gold. Stocks have the highest rate of return in Normal periods. Gold has the second-highest return but has also experienced high drawdowns in these environments.

Our S&P volatility regime is registering a Low and Falling reading, which favors stocks over gold and then bonds from an annualized return standpoint. The combination has occurred 32% of the time since 2003.