Current market environment performance of dynamic, risk-managed investment solutions.
By Daniel Poppe
Market snapshot
• Stocks: Stocks were higher last week. The S&P 500 rose 1.11%, the Dow Jones Industrial Average increased by 1.11%, the NASDAQ Composite gained 1.33%, and the Russell 2000 advanced 1.78%.
• Bonds: The 10-year Treasury yield fell from 4.20% to 4.13%.
• Gold: Spot gold rose 3.37%, closing above $3,800 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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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 closed at record levels on Friday, undeterred by the government shutdown that started Wednesday after Congress failed to pass a spending bill to keep the government funded. So far, there are no signs of a resolution, but stocks have continued to climb—just as they have since April—on hopes of AI productivity gains.
With the third-quarter earnings season approaching, investors appear unwilling to leave the market before seeing how companies have performed amid the AI boom. FactSet’s Earnings Insight report projects earnings growth of 8%—a healthy rate that has encouraged investors. The coming weeks will soon show whether companies can meet those expectations.
The Bureau of Labor Statistics did not release its monthly employment report last Friday due to the ongoing government shutdown. Third-quarter 2025 GDP growth is scheduled for release at the end of this month. The Atlanta Fed’s GDPNow estimates 3.8% growth, matching the second-quarter rate if accurate and reinforcing support for this year’s surprising market rally.
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 remain below their highs from the past year as investors wait to see how aggressively the Federal Reserve will continue lowering rates after resuming its cutting cycle last month. Weaker labor market data supports the Fed’s ability to ease policy, but uncertainty over the potential inflationary effects of tariffs may lead policymakers to take a more cautious approach.
Data disruptions caused by the government shutdown could make it harder for the Fed to assess the economy before its next meeting. According to CME Group’s FedWatch tool, markets currently expect a 25-basis-point cut at the meeting, with the possibility of additional rate reductions in the months ahead.
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 130% exposure to the S&P 500. Exposure changed to 110% net long on Monday, 50% net long on Tuesday, 70% net long on Wednesday, 100% net long on Thursday, and 80% net long on Friday.
Our QFC Political Seasonality Index strategy began the week in a defensive posture, shifted to an aggressive stance on Monday, and reverted to a defensive posture on Thursday. (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 held a 200% net long exposure to the NASDAQ 100 throughout the week.
The Systematic Advantage strategy started the week with a 60% net long exposure to the S&P 500. Exposure changed to 90% net long on Monday.
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 their 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. It is a stage of relatively low risk across the asset classes.