Current market environment performance of dynamic, risk-managed investment solutions.
By Will Hubbard
Market snapshot
• Stocks: Stocks finished the week in the red after selling began Monday afternoon. The S&P 500 fell 1.91%, the NASDAQ Composite lost 2.71%, and the Dow Jones Industrial Average declined 1.85%. Small-cap stocks held up better, with the Russell 2000 down 0.75% for the week.
• Bonds: Expectations for additional rate cuts are being questioned as the economy remains resilient. The benchmark 10-year Treasury yield fell to about 4.07% from 4.15%.
• Gold: Gold fell 0.46% last week but remained above $4,000, closing at $4,065.14 per ounce.
• Market indicators and outlook: Overall, our strategy positioning was bearish. 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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Stocks
Stocks entered the week on a seemingly firm footing, but a thin flow of data left markets reacting to mostly noise. The S&P 500 finished the week lower, as did the NASDAQ, which was dragged down by its tech-heavy constituents following Nvidia’s quarterly earnings release.
Nvidia reported third-quarter earnings results that beat expectations on both sales and earnings. The stock initially rallied, but the enthusiasm quickly faded as concerns emerged that much of its recent earnings growth may be tied to IOUs for future AI services. The worry is that companies are buying chips from Nvidia under the assumption that the AI boom will never bust. With Nvidia now approaching a $5 trillion market cap, investors are becoming more critical of its ability to realize those payments.
With data distribution disrupted by the government shutdown, markets have been operating on limited information. The prevailing view is that inflation is still cooling, growth is bending but not breaking, and the Federal Reserve is still expected to lower rates (though that’s less of a sure thing).
Last week’s economic releases were roughly in line with expectations. Unemployment claims came in slightly better than forecast at 220,000 versus the expected 227,000. Average hourly earnings rose 0.2% month over month, below the 0.3% estimate. The unemployment rate ticked up to 4.4% from 4.3%.
Bespoke Investment Group highlighted another dynamic shaping markets this month: When the Russell 1000 is divided into deciles based on price-to-sales (P/S) ratio, the decile of stocks with the highest P/S multiples is down an average of 7.6% so far in November—the hardest-hit group in the Index. Yet this same decile has also produced the strongest year-to-date returns, more than double those of any other decile.
The key takeaway is that risk is always present, especially in an environment where performance by the largest companies dominates headlines and drives index returns. Staying diligent and understanding what you own is critical to avoiding unexpected shocks when markets react to shifting sentiment or fear.
Bonds
Treasury yields were broadly stable last week. The 10-year hovered in the low-4% range, dipping from 4.15% to 4.07% as investors continued to digest the Federal Reserve’s recent 0.25% rate cut and reassess the likelihood of additional easing this year and into 2026. What had once seemed like a foregone conclusion is now less certain.
Even without new economic data, bond markets remain anchored by two themes:
Credit spreads have widened since mid-September but remain historically low.
With equity valuations continuing to climb, the prospect of increased volatility looms. And with interest rates still well above the lows of the past decade, investors may want to monitor the bond markets for potential opportunities.
Gold and commodities
Gold stabilized last week, slipping slightly lower after its larger pullback the previous week. With equity momentum cooling and the dollar edging lower, some investors rotated selectively back into defensive assets. Gold remains in a constructive long-term uptrend, supported by central bank demand, geopolitical uncertainty, and the expectations of lower real rates.
More broadly, commodities appear to be entering a consolidation phase. If global growth shows signs of re-acceleration once full economic data resumes, industrial and energy markets could see renewed leadership heading into early next year.
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.
The indicators
The QFC S&P Pattern Recognition strategy started the week 40% long. It added exposure during the broad market sell-off, moving to 120% long at Tuesday’s close and 180% on Wednesday. It then scaled back, reducing exposure to 150% on Thursday and 130% on Friday.
Our QFC Political Seasonality Index started the week in its risk-on posture, switched to risk-off at Monday’s close, and shifted back to risk-on exposure at Thursday’s close. (The 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).
Our intermediate-term tactical strategies have been 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 was 120% long all week. The Systematic Advantage strategy started the week 90% long, moved to 60% long at Monday’s close, rose to 120% long at Wednesday’s close, and reduced exposure to 60% long on Friday. Our QFC Self-adjusting Trend Following strategy was in cash all 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 60% of the time since 2003 and has been a positive regime 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 stocks 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 stocks and gold.