Current market environment performance of dynamic, risk-managed investment solutions.
By Daniel Poppe
Market snapshot
• Stocks: Stocks ended mixed last week as markets balanced optimism about growth with ongoing tariff concerns. The NASDAQ Composite slipped 0.18%, the Dow Jones Industrial Average fell 0.11%, the S&P 500 edged down 0.08%, while the Russell 2000 gained 0.22%.
• Bonds: Treasury yields fell from 4.26% to 4.23% as investors focused on rate-cut expectations.
• Gold: Spot gold rose 2.26% 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 Rising, which favors gold over stocks and then bonds.
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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 made new highs, driven by optimism about potential productivity gains from artificial intelligence breakthroughs. Investors also expect tariff-related headwinds to remain manageable. Second-quarter GDP growth was revised up to 3.3%, 0.3% higher than last month’s reading. Investors continue to show confidence in the economy’s growth prospects, supporting higher valuations for U.S. stocks.
Last week, a federal appeals court ruled that many of President Trump’s recently implemented tariffs were not permissible. If the Supreme Court decides to review the case, its ruling could have significant implications for the economy, corporate earnings, and how investors value stocks and bonds.
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 continued to climb as expectations for rate cuts stayed in focus. While uncertainty remains over how tariffs might affect inflation, softer labor market data and relatively low inflation suggest the Federal Reserve could resume rate cuts soon.
The Fed’s next meeting is scheduled for September 17. According to CME Group’s FedWatch tool, markets are pricing in a 25-basis-point cut, with policymakers leaning toward supporting the full-employment side of the Fed’s dual mandate. A cut would likely benefit both stocks and bonds, with additional rate cuts possible before the end of the year.
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). 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.
FPI’s indicators
The QFC S&P Pattern Recognition strategy’s primary signal started the week with a 200% net long exposure to the S&P 500 and changed to 140% net long on Friday.
Our QFC Political Seasonality Index strategy was aggressive throughout last week. (Our QFC Political Seasonality Index—with all of the daily signals—is available post-login in our Weekly Performance Report section under the Domestic Tactical Equity category.)
The Volatility Adjusted NASDAQ strategy started the week with a 160% net long exposure to the NASDAQ 100, reduced exposure to 140% net long on Monday, and scaled back further to 10% net long on Wednesday.
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.
Because the Volatility Adjusted NASDAQ, Systematic Advantage, QFC Self-adjusting Trend Following, and the QFC S&P Pattern Recognition strategies can employ leverage, the 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 Rising reading, which favors gold over stocks and then bonds from an annualized return standpoint. The combination has occurred 27% of the time since 2003. It is a stage of relatively low risk across the asset classes.