Market Update 9/14/26

By Will Hubbard

Market snapshot

•  Equities: U.S. stocks moved lower last week. The S&P 500 fell 0.78%, the Dow Jones Industrial Average dropped 1.56%, the NASDAQ Composite declined 0.63%, and the small-cap Russell 2000 lost 2.38%.

•  Fixed income: The 10-year Treasury yield rose from 4.78% to 4.97% last week.

•  Gold and commodities: Gold fell 1.83% for the week.

•  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

Small-caps led the market lower last week. The Russell 2000 Index fell 2.38%, roughly three times the S&P 500 Index’s 0.78% decline. Because smaller companies tend to be more sensitive to economic and financing conditions, their sharper decline suggested a more defensive tone among investors.

Market breadth was also weak. Only two of the 11 S&P 500 sectors finished higher, led by Energy with a 2.06% gain.

Bespoke Investment Group noted in its August 21 report that, with earnings season behind the market, investor focus would shift back to the economy, the Federal Reserve, and the Strait of Hormuz.

Bespoke also observed that recent economic data had been positively biased, especially in manufacturing, but that historically this has not always been the best backdrop for equities. Stronger economic data can support corporate earnings, but it can also push interest rates higher and give the Fed less reason to lower them. Investors then have to weigh firmer growth against higher borrowing costs.

Last week’s decline did not break the longer-term trend. The SPDR S&P 500 ETF Trust (SPY) closed Friday above both its 50-day and 200-day moving averages. However, SPY finished less than 1% above its 50-day average, leaving the shorter-term trend closer to being tested if selling continues.

Bespoke also noted in its August 21 report that the market still had to navigate September and October. With the 50-day average nearby and a busy stretch of economic data ahead, that seasonal backdrop may warrant some caution in the weeks ahead.

Fixed income

Bonds offered little diversification last week. Rates rose sharply, with the 10-year Treasury yield climbing from 4.78% to 4.97%, pushing Treasury prices lower as stocks also declined.

Treasury ETFs reflected that pressure. The iShares 7-10 Year Treasury Bond ETF (IEF) and the iShares 20+ Year Treasury Bond ETF (TLT) both finished below their 50-day and 200-day moving averages, indicating continued weakness in both intermediate- and long-term Treasurys. TLT remains further below its 200-day average than IEF, reflecting greater pressure at the long end of the curve. Longer maturities are more sensitive to changes in interest rates.

Bespoke Investment Group noted in its August 28 report, before last week’s move, that the Adrian-Crump-Moench model showed the 10-year Treasury term premium—the extra return investors demand for holding longer-term bonds—had remained relatively stable, while the portion of the yield tied to expected future short-term rates had risen. Bespoke also noted that long-term inflation expectations remained stable. Taken together, the data suggested that recent moves in long-term yields were being driven more by expectations for future interest rates than by rising inflation concerns or greater bond-market risk aversion.

That distinction matters for positioning. Expectations for higher policy rates can push borrowing costs higher across the economy, putting pressure on both stocks and bonds.

Gold and commodities

Gold also offered little portfolio diversification last week. Stocks and Treasury prices declined, while gold fell 1.83% and COMEX gold futures declined 1.51%.

The U.S. dollar index slipped just 0.05%, leaving the currency essentially unchanged. A stronger dollar can weigh on gold because the metal is priced in dollars, making it more expensive for buyers using other currencies. With the dollar largely flat, however, currency strength offered little explanation for gold’s decline.

Interest rates may have played a larger role. Because gold pays no interest, rising Treasury yields can make interest-bearing assets relatively more attractive. The 10-year Treasury yield climbed last week, creating a less favorable backdrop for gold. This is a general market relationship, though, not a measured cause of last week’s move.

On the technical side, SPDR Gold Shares (GLD) finished the week above its 50-day moving average but below its 200-day moving average, leaving the fund between its short- and long-term trend lines.

FPI’s gold fund followed the metal lower. The Quantified Gold Futures Tracking Fund (QGLDX) fell 2.03% for the week. As its name suggests, the fund is designed to track gold futures, so a down week for gold shows up directly in its return. 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

The QFC S&P Pattern Recognition strategy (QSPMX) increased its equity exposure as the week progressed. It began the week 90% net long, moved to 130% on Tuesday, 170% on Wednesday, and 190% on Thursday, and ended the week 200% net long.

The QFC Political Seasonality Index began the week in its risk-on posture and moved to risk-off on Tuesday’s close, where it remained for the week. 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 remained 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 remained 140% long throughout the week. The Systematic Advantage strategy remained 120% long throughout the week. The QFC Self-Adjusting Trend Following strategy remained in cash for the week. 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 drawdown 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.