Current market environment performance of dynamic, risk-managed investment solutions.
By Sam Sheeran
Market snapshot
• Stocks: Stocks were lower last week.
• Bonds: The 10-year Treasury yield fell last week.
• Gold: Spot gold rose last week, closing above $3,400 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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Index summary
The major U.S. stock market indexes were down last week. The Dow fell 1.3%, the NASDAQ Composite lost 0.61%, the S&P 500 declined by 0.36%, and the Russell 2000 was down 1.45%. The 10-year Treasury bond yield fell from 4.51% to 4.40%. Spot gold closed the week up 3.68%.
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 continued to rebound from their early April lows. The S&P 500 finished Friday below 6,000 and near its all-time high from February. Markets are still pricing in expected gains in productivity and earnings from AI improvements. But rising tensions between Israel and Iran led to a pullback on Friday.
The Atlanta Fed’s GDPNow estimate for second-quarter growth fell from 3.8% to 3.5%, driven by lower consumer and government spending.
One concern for the stock market is uncertainty about the economic outlook. Companies tend to delay capital investment when conditions are unpredictable since returns may take years. That hesitation has shown up in recent data. The Atlanta Fed now projects a 1.4% decline in real gross private domestic investment for the quarter.
Bonds
The iShares 7-10 Year Treasury Bond ETF (IEF), which tracks intermediate-term Treasury bonds, finished the week above both its 50-day and 200-day moving averages.
The bond market continues to face pressure from concerns about the growing U.S. federal debt and budget deficit. Yields have risen to compensate investors for potential inflation that follows higher deficits.
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 140% net long exposure to the S&P 500. Exposure changed to 120% net long on Monday, 90% net long on Wednesday, 130% net long on Thursday, and 100% net long on Friday.
Our QFC Political Seasonality Index strategy started the week in a defensive position. It moved to a more aggressive position on June 10 before returning to a defensive stance on Friday. (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 60% net long exposure to the NASDAQ 100. It increased exposure to 120% by Friday.
The Systematic Advantage strategy held a 90% net long exposure to the S&P 500 throughout the week.
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 Low and Falling reading, which favors stocks over gold and then bonds from an annualized return standpoint. The combination has occurred 37% of the time since 2003. All three asset classes tend to have a positive return in this environment.