Market Update 4/7/26

By Jerry Wagner

Market snapshot

•  Stocks: Despite the four-day week, the major stock indexes posted their first strong performance in some time. The S&P 500 advanced 3.4%, the NASDAQ rallied 4.4%, and the Russell 2000 rose 3.3%.

•  Bonds: Bonds also did well. The U.S. Aggregate Bond ETF (AGG) rose 1.0%, and the 20-year Treasury bond ETF (TLT) gained 1.75.

•  Gold: Gold futures closed the week at $4,696.60, up $172.30 per ounce, or 3.81%. The Trade-Weighted U.S. Dollar Index fell 0.13%.

•  Market indicators and outlook: Technical indicators are mostly positive for stocks, as are the strategies. The economic environment is classified as Normal, 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

The stock market rallied strongly over the holiday-shortened week, in line with seasonal tendencies. However, as the chart above illustrates, those gains were not enough to move the market out of the downtrend that has been in place since the February highs.

In addition, the important 200-day moving average that I described as support in my last Market Update was subsequently broken, confirming the downtrend. That same moving average now becomes resistance, which could impede any reestablishment of an uptrend. The chart shows that we are at that resistance level.

Of course, the market downturn relates to the geopolitical consequences of the Iran conflict, which has driven oil prices substantially higher. As shown in the following chart, that surge has been accompanied by a decline in stock prices. Until the uncertainty surrounding the conflict is resolved, this relationship is likely to continue. At the moment, this seems to be a short-term manifestation, but hang on for the next chapter.

Despite the geopolitical uncertainty, a number of economic reports continue to clarify the health of the U.S. economy. And these reports are exceptionally good.

The ISM Manufacturing Index for March was stronger than expected, though we saw a rise in prices paid. That could be an inflationary concern. With the increase in oil prices, that result is not surprising.

Last week also brought very strong employment data. Nonfarm payrolls were substantially stronger than forecast, which has historically been associated with higher stock prices over the intermediate term. With that report came yet another downtick in the unemployment rate. Reflecting those positive trends, initial claims for unemployment benefits fell to their lowest level since 2022.

The good news was not confined to these economic sectors. A review of recent economic reports (Bespoke Diffusion Index) shows one of the highest levels on record for reports beating forecasts—second only to the post-COVID recovery period in October 2020.

The market has remained in the oversold status noted in my previous update. In fact, it has been in that state for more than 19 consecutive days. Historical data since 1953 suggest that such periods tend to occur near market lows, although weakness can persist for one to three additional months. However, in all of those instances, stocks were higher 12 months later, with an average gain of 15% (see the following chart).

We can also check all past 12-month periods of market history to determine which most resembles the last 12 months. Currently, Bespoke Investment Group finds the best match to be September 1998 through September 1999. Following that period, the S&P posted gains over the subsequent one-, three-, six-, nine-, and 12-month periods, with a maximum drawdown of just 2.34%.

Finally, since 1990, April has been the second-best month of the year for stocks, generating profits over 70% of the time. So perhaps we should chalk up last week’s strong performance simply to that. But in addition, it is rare for March to end with a gain of more than 1% on its final day and for that to be followed by a gain of more than 1% on the first trading day in April. It has happened just four times since 1991. In each instance, the NASDAQ rose over the following three and 12 months, with a maximum drawdown of just 6.29%.

The bottom line: We are largely at the mercy of the geopolitics of our time. As long as these forces drive oil prices higher, we can expect the established downtrend in equity prices to continue. But if the current conflict eases, many factors are aligned to take stock prices quickly higher.

Bonds

Since my last Market Update, bond prices have broken out above the topping formation first established in January of this year. As with stocks, that yield level is now acting as support for the new, higher range of bond yields. As a result, yields have moved to new intermediate-term highs, only to quickly decline back to those prior peak levels. From there, they have moved higher once again. This is a warning to stock and bond investors alike.

Like stocks, bond yields are tied to the ebb and flow of the present geopolitical environment. In addition, fundamental forces make it unlikely that the Federal Reserve will intervene and further reduce rates. Higher oil prices point to renewed inflationary pressure, while improving employment data suggest continued economic strength. Both work against near-term Fed easing, and, in turn, against the interests of bond investors. Hence, bond prices have been falling.

Meanwhile, the high-yield bond market continues to track stocks. It got a bit of a bounce last week but remains in a downtrend.

Gold

While gold has historically provided defense for portfolios when stocks have declined, it has so far failed to in the current environment. It has, however, moved back above its intermediate-term moving average.

Mark Haefele, Wall Street strategist and chief investment officer for UBS Global Wealth Management, reiterated his bullish estimates for gold in a research note last week. UBS forecasts the precious metal will rise 35% to $6,200 an ounce by the end of June, before easing back to $5,900 an ounce by year-end, citing rising U.S. debt, de-dollarization trends, and geopolitical tensions as structural drivers.

Meanwhile, the U.S. dollar has traded in a relatively narrow range following its quick ascent at the start of the Iran conflict. The fact that it has not moved higher is good news for gold investors, as gold typically falls in the face of a rising dollar.

Flexible Plan Investments (FPI) is the subadviser to the only U.S. gold mutual fund, The Quantified Gold Futures Tracking Fund, formerly The Gold Bullion Strategy Fund. 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 short-term technical indicators of future stock market price changes that I watch are now mostly negative. Our QFC S&P Pattern Recognition strategy has just a 60% exposure to the S&P 500 Index as of Tuesday’s close.

Our QFC Political Seasonality Index (PSI) strategy returned to the stock market at the close on Thursday, March 12. It will remain fully invested until April 17. (Our QFC Political Seasonality Index—with all of the daily signals for 2026—is available post-login in our Weekly Performance Report section under the Domestic Tactical Equity category.)

FPI’s intermediate-term tactical equity strategies remain mixed, with a defensive bias. Classic continues 100% long equities. The Volatility Adjusted NASDAQ strategy has a 20% net short exposure to the NASDAQ 100. Systematic Advantage ended the week just 60% net long. Meanwhile, our QFC Self-adjusting Trend Following strategy continues in its defensive mode. Although our volatility measure has improved, the primary STF signal remains negative on stocks. QFC Dynamic Trends has also moved to a defensive position in the Quantified Eckhart Managed Futures Fund (QECTX).

Because the QFC Dynamic Trends, Volatility Adjusted NASDAQ, Systematic Advantage, QFC Self-adjusting Trend Following, and QFC S&P Pattern Recognition strategies can employ leverage, the investment positions may exceed 100%.

FPI’s Growth and Inflation measure, one of our Market Regime Indicators, shows that markets are in a Normal economic environment stage (inflation and GDP are growing). 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 drawdowns in these environments.

Our S&P volatility regime is registering a High and Rising reading. Since 2003, this environment favors stocks over gold and then bonds from an annualized return standpoint. Stocks have the highest drawdown risk among the three asset classes. Bonds have the lowest return, risk, and drawdown. The High and Rising combination has occurred 28% of the time since 2003.