Market insights and analysis

By Will Hubbard

Market snapshot

•  Stocks: Markets rallied after Memorial Day, boosted by a tariff delay and strong May performance, despite signs of softening in key economic data.

•  Bonds: Yields fell as investor concerns over tariffs and rates abated.

•  Gold: The metal declined 2.03% last week as it continued to consolidate after a 42% gain over the past year.

•  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

Equity markets rallied broadly last week. All sectors posted gains except for Energy. The S&P 500 rose 1.90%, the NASDAQ Composite gained 2.02%, the Dow Jones Industrial Average climbed 1.67%, and the Russell 2000 added 1.32%. The 10-year Treasury bond yield dipped from 4.50% to 4.40%. Gold fell 2.03%.

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 shortened trading week marked a positive turn for U.S. financial markets. Investors processed a wave of new information—from economic reports and earnings results to rapidly changing tariff policies. The rally began Tuesday, following Memorial Day, with all major indexes rising more than 1%. Much of the optimism was driven by President Trump’s announcement that the planned 50% tariffs on European imports would be delayed until July 9.

Contrary to the adage, “Sell in May and go away,” staying invested paid off last month. The S&P 500 added about 6% in May, and the tech-heavy NASDAQ gained more than 9%. According to Bespoke Investment Group, May 2025 was the NASDAQ’s second-best May on record. Historically, when the Index gains more than 5% in May, the median return for the following 12 months is 15.06%.

Several key economic indicators were released last week. The second estimate for Q1 GDP confirmed an annualized contraction of 0.3%, with real GDP revised down to -0.2%. Consumer spending rose 1.2%, one of the slowest growth rates since COVID-related stimulus spending ended a few years ago. Durable goods orders fell 6.3% in April, which was better than the expected 7.8% decline. Unemployment claims dipped to 240,000, compared to the forecast of 229,000. Personal income rose 0.8% in April, exceeding both the previous reading of 0.7% and the anticipated 0.3%. Pending home sales dropped 6.3%, worse than the expected 0.9%.

The key takeaway for investors: Stay flexible and willing to adapt. Historically, strong monthly gains tend to lead to more strength in the following month and year. But softening in GDP, durable goods orders, and pending home sales suggest growing cracks in the economic data. Paying attention to both market signals and changes in sentiment and behavior, as reflected in more fundamental economic data, remains essential.

Bonds

Treasury yields fell across all maturities last week, driven by the revised GDP data and growing speculation about Federal Reserve rate cuts later in the year. The benchmark 10-year Treasury declined from 4.51% the previous Friday to 4.40%. The 30-year yield also dropped, falling from 5.04% to 4.92%.

High-yield bonds performed well, with credit spreads contracting across categories. The average high-yield rate dropped 16 basis points to 7.71%, indicating improving investor confidence in the economy.

The broader message from the bond market is mixed. While the Fed is signaling future rate cuts, yields remain elevated—reflecting ongoing investor demand for compensation amid uncertainty. Still, these higher yields haven’t shaken investor confidence. High-yield rates remain stable, and the yield curve continues to slope upward. If markets were pricing in a deeper recession, we would likely see shorter-term yields rise, a renewed yield-curve inversion, and widening credit spreads as investors moved toward safer assets like Treasurys.

Gold

Gold experienced a volatile week, falling 2.03% to $3,289.25 per ounce. Despite the pullback, the metal is up $977 from May 2024, a 42% increase. Gold’s strong rally in 2025 continues, but the recent pause suggests the metal is creating a new base. This process can bring added volatility as buyers adjust to higher price levels.

The following chart shows gold’s movement over the past month. While the metal is up significantly year over year, the recent fluctuations have been frustrating for investors who view gold as a long-term diversifier and store of value. Equities did well, which offset gold’s recent sluggishness.

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.

indicators:

The QFC S&P Pattern Recognition strategy started last week 180% long and reduced exposure to 140% long on Friday’s close. Our QFC Political Seasonality Index remained in its risk-on posture. (Our QFC Political Seasonality Index is available—with all of the daily signals—post-login in our Weekly Performance Report section under the Quantified Fund Credit category.)

Our intermediate-term tactical strategies have been 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 their exposure to a more defensive posture during downtrends.

The Volatility Adjusted NASDAQ (VAN) strategy began the week in cash. On Wednesday, it moved to 40% long and remained there for the week. Systematic Advantage (SA) strategy was 120% long all week. Our QFC Self-adjusting Trend Following (QSTF) strategy remained 200% long. VAN, SA, and QSTF can use leverage, which means the investment positions may 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 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.