Market insights and analysis

By Will Hubbard

Market snapshot

•  Stocks finished the week little changed amid choppy trading, cautious Fed guidance, and renewed geopolitical tensions.

•  Bond yields declined across the board, reflecting safe-haven flows and growing expectations of future Fed rate cuts.

•  Gold spiked on geopolitical tensions but pulled back after the midweek Fed meeting, continuing to consolidate after a stellar 12-month run.

•  Market indicators and outlook: Strategy positioning was relatively muted, with most tactical strategies staying aligned with broader market trends. 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.

***

Index summary

Equity markets were mostly flat last week. The S&P 500 lost about 0.12%, the NASDAQ Composite edged up 0.22%, and the Dow Jones Industrial Average gained 0.07%. Small-cap stocks fared a bit better, with the Russell 2000 rising roughly 0.44%. The 10-year Treasury yield fell a few basis points to about 4.38%. Gold prices seesawed before ending the week down about 1.86%, closing at $3,368.39 per ounce.

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 holiday-shortened trading week saw choppy trading as investors navigated a volatile news cycle that kept sentiment mixed.

On Wednesday, the Federal Reserve held interest rates steady for a fourth consecutive meeting. However, it raised its inflation outlook and lowered its growth forecast, adding to uncertainty about the economic backdrop.

Geopolitical concerns also weighed on markets. After Israel struck Iranian nuclear targets the prior week, President Trump said he would take two weeks to decide on potential U.S. involvement. Over the weekend, he acted, authorizing the use of “bunker buster” bombs to disrupt Iran’s nuclear development efforts.

U.S. markets were closed Thursday for the Juneteenth holiday. By Friday, stocks had given back midweek gains. Hopes for de-escalation in the Middle East led to a brief bounce, but major indexes ended the week little changed.

Economic data also came in weaker than expected. May retail sales fell 0.9%, the second consecutive monthly decline. Auto sales also dropped sharply after a March surge ahead of new auto tariffs in April.

The housing sector showed signs of strain. Builder sentiment declined, with the NAHB housing market index falling to 32 in June—its lowest level since 2022. May housing starts plunged 9.8% to an annualized 1.26 million units, the slowest pace since May 2020.

The combination of slowing economic data, geopolitical tensions, and a cautious Fed outlook has left the market in a delicate balance. Investors are hopeful the Fed may cut rates later this year, but rising risks are tempering enthusiasm.

The key takeaway: Investors should stay flexible. Paying attention to both market trends and economic signals can help guide investment decisions in a changing environment.

Bonds

Treasury yields declined across all maturities last week, driven by safe-haven buying and shifting expectations for Federal Reserve policy. The 10-year Treasury yield finished the week around 4.38%, down from roughly 4.4% at the start. The two-year Treasury ended near 3.90%, as investors increasingly priced in potential Fed rate cuts by year-end. The 30-year Treasury eased to about 4.89%.

Credit markets demonstrated resilience. High-yield corporate bonds outperformed, with credit spreads tightening slightly despite the overall risk-off tone in other assets. The average yield on junk-rated bonds hovered in the high 7% range, a bit lower than the week before—a sign that investors were still willing to embrace credit risk.

Investment-grade corporate bond issuance was also strong. Most new offerings were, on average, oversubscribed. Borrowers moved to lock in financing amid the stable rate environment, and investors had ample appetite for fixed-income assets.

The yield curve remained inverted, though the gap between short- and long-term yields narrowed slightly. The spread between the two-year and 10-year yields is now about 0.48 percentage points—still negative, but less extreme than it was a few weeks ago.

A persistently inverted curve can signal recession risk. However, if bond markets were bracing for a severe downturn, we would likely see short-term yields climbing much higher (or long yields plunging) and credit spreads widening significantly, reflecting a flight to safety. That hasn’t happened. Instead, the modest steepening of the curve and tighter spreads suggest cautious optimism. Investors appear to be preparing for slower growth—not a deep recession—with room for the Fed to begin easing policy.

Gold

Gold had a volatile week and ended lower despite geopolitical tensions. Prices surged early in the week, nearing $3,400 per ounce, as investors sought safe-haven assets amid rising conflict in the Middle East. But after the Federal Reserve’s midweek meeting, profit taking erased those gains. Gold ended the week at about $3,368 per ounce, down 1.86% from the prior Friday’s close. Still, the metal remains up roughly 40% year over year, one of its strongest 12-month performances in recent history.

After that sharp run-up, gold appears to be in a consolidation phase. It is forming a new price base, a process that often brings volatility as the market adjusts. That back-and-forth has been testing investors’ patience, especially those who view gold as a portfolio diversifier and store of value. But with stocks performing well, the softness in gold has been somewhat offset in diversified portfolios.

While recent momentum has stalled, gold’s long-term case remains supported by strong fundamentals—such as its role as an inflation hedge—and by persistent global uncertainty, which often boosts demand. Some short-term turbulence is typical following such a large rally.

Flexible Plan Investments (FPI) is the subadvisor to the only U.S. gold mutual fund, The Gold Bullion Strategy Fund (QGLDX), designed at its introduction 11 years ago to track the daily price changes in the precious metal.

The indicators

The QFC S&P Pattern Recognition strategy started last week 140% long. It reduced exposure to 120% long on Monday and further reduced it on Wednesday’s close before rebounding to 100% long Friday. Our QFC Political Seasonality Index remained in its risk-off posture. (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.)

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 (VAN) strategy began the week 120% long. It moved to 100% long on Monday, then to 80% on Wednesday ahead of the market holiday, ending at 60% long on Friday. The Systematic Advantage (SA) strategy maintained a 90% long exposure throughout the week. Our QFC Self-adjusting Trend Following (QSTF) strategy maintained a 200% long position throughout the week. These strategies can use leverage, so their exposure may exceed 100%.

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—one of our Market Regime Indicators—shows that we are in a Normal economic environment (characterized by falling inflation and growing 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. All three asset classes tend to have a positive return in this environment.