Current market environment performance of dynamic, risk-managed investment solutions.
By Daniel Poppe
Market snapshot
• Stocks: Stocks were higher last week. The NASDAQ Composite gained 0.48%, the S&P 500 added 0.91%, the Dow Jones Industrial Average rose 2.18%, and the Russell 2000 advanced 2.75%.
• Bonds: The 10-year Treasury yield fell from 4.59% to 4.56% last week.
• Gold: Spot gold lost 0.68% last week, closing above $4,600 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.
***
For the latest information on our Quantified Funds, check out our weekly fund updates. You can also see the daily holdings of the funds here.
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 remain near their highs for the year, showing strength after a volatile first quarter. Optimism around AI, hopes for a recovery in oil supply, and better-than-expected corporate earnings have helped restore investors’ confidence in current valuations, allowing the market to reach new highs this quarter.
FactSet’s Earnings Insight report shows that more than 90% of S&P 500 companies have reported first-quarter results so far, with most posting better-than-expected earnings. Earnings growth has also been strong, with the blended rate at 28.4%—the highest level in years. Valuations for the Index remain above historical averages.
Bonds
The iShares 7-10 Year Treasury Bond ETF (IEF), which tracks intermediate-term Treasury bonds, finished last week below both its 50-day and 200-day moving averages.
Bonds have not seen the same strength as stocks in recent weeks. The bond market has been trending lower since late February. Fixed-income investors may be wary of potentially higher inflation given recent oil disruptions. The transition from Jerome Powell to Kevin Warsh as Federal Reserve chair could also be influencing investors’ expectations for where the market goes from here.
The Federal Open Market Committee did not meet this month. Its next scheduled meeting is in mid-June. The CME FedWatch currently shows that the market strongly expects no rate change at the meeting. Inflation has ticked up in recent months, so the Fed may monitor whether price pressures stabilize before adjusting rates in either direction.
Gold
The SPDR Gold Shares ETF (GLD), which tracks the price of gold, finished the week below its 50-day moving average but above its 200-day moving average.
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.
FPI’s indicators
The QFC S&P Pattern Recognition strategy’s primary signal started the week with a 0% exposure to the S&P 500. Exposure changed to 20% net long on Monday, 80% net long on Wednesday, and 50% net long on Thursday.
Our QFC Political Seasonality Index strategy was defensive at the beginning of the week, then shifted to an aggressive posture on Friday. (Our QFC Political Seasonality Index is available—with all of the daily signals—post-login in our Weekly Performance Report section under the Domestic Tactical Equity category.)
The Volatility Adjusted NASDAQ strategy started the week with a 60% net long exposure to the NASDAQ 100. Exposure changed to 20% net long on Monday and 40% net long on Thursday.
The Systematic Advantage strategy held a 120% net long exposure to the S&P 500 throughout the week.
Our QFC Self-adjusting Trend Following strategy’s primary signal was 0% 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 the investment positions may at times 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 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.