Current market environment performance of dynamic, risk-managed investment solutions.
By Daniel Poppe
Market snapshot
• Stocks: Stocks were up last week.
• Bonds: The 10-year Treasury yield fell last week.
• Gold: Spot gold rose last week, closing above $2,500 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 High and Rising, which favors stocks over gold and then bonds.
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The major U.S. stock market indexes moved higher last week. The Russell 2000 returned 3.62%, the NASDAQ Composite returned 1.41%, the S&P 500 returned 1.47%, and the Dow returned 1.29%. The 10-year Treasury bond yield fell from 3.89% to 3.81%. Spot gold closed the week up 0.18%.
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.
After seeing high levels of volatility at the beginning of the month, stocks are approaching the end of August near their 52-week high. This sharp rebound coincided with the conclusion of a strong second-quarter earnings season.
According to FactSet’s August 16 earnings insight report, the majority of S&P 500 companies reported positive earnings surprises, and earnings growth was robust. These strong results likely contributed to the market once again nearing its highs.
Bonds
The iShares 7-10 Year Treasury Bond ETF (IEF), which tracks intermediate-term Treasury bonds, finished last week above both its 50-day and 200-day moving averages.
Bonds have performed well the last few months following second-quarter inflation reports that came in lower than expected. Cooler inflation is anticipated to give the Federal Reserve room to lower interest rates, a positive catalyst for bonds.
Market participants fully expect a Fed rate cut at the September meeting. The highest probability is for a 25-basis-point cut, but a 50-basis-point cut is also possible. This would be the first Fed rate cut since March 2020, when the Fed cut rates in response to the COVID-19 pandemic.
Gold
The SPDR Gold Shares ETF (GLD), which tracks the price of gold, is near its 52-week high and well 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 no exposure to the S&P 500. Exposure changed to 10% net long on Monday, to 30% net long on Tuesday, and to 20% net long on Wednesday, where it remained for the rest of the week.
Our QFC Political Seasonality Index strategy was aggressive 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 last week with an allocation of 20% net long to the NASDAQ 100. It changed the allocation to 40% net long on Monday, raised it to 100% net long on Tuesday, reduced it to 80% net long on Wednesday, and then returned to 100% net long on Thursday.
The Systematic Advantage strategy held a 120% allocation 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 last week.
The Volatility Adjusted NASDAQ, Systematic Advantage, QFC Self-Adjusting Trend Following, and the 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 High and Rising reading, which favors equities 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.