Market Update 8/3/26

By Daniel Poppe

Market snapshot

•  Stocks: The major U.S. stock market indexes moved higher last week. The Russell 2000 rose 0.05%, the Dow Jones Industrial Average gained 1.04%, the S&P 500 Index advanced 1.06%, and the NASDAQ Composite increased by 1.60%.

•  Bonds: The 10-year Treasury yield rose from 4.69% to 4.75% last week.

•  Gold: Spot gold fell 0.16% last week, closing above $4,000 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 remain above both moving averages, reflecting positive long-term trends despite the sideways movements seen since early June. Investors have been watching second-quarter earnings results as well as fluctuating oil prices, which fell sharply from mid-May through early July before rising throughout July.

Oil prices have yet to stabilize, but corporate earnings have provided more clarity on profit trends. FactSet’s Earnings Insight report shows that the blended earnings growth rate for the index is 47.4%. If that rate holds, it would be the highest rate of earnings growth since 2021. Earnings growth has helped bring the forward 12-month price-to-earnings ratio to 19.6, below its five-year average of 19.9 but above its 10-year average of 19.0.

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.

Unlike stocks, bonds remain below both moving averages, indicating a negative long-term trend in the bond market. Continued fluctuations in oil prices may be stoking fears of higher future inflation.

The Federal Open Market Committee (FOMC) is undoubtedly keeping a close eye on economic developments and showed signs of a hawkish shift at its latest meeting. While the committee voted unanimously to leave rates unchanged in June, the July decision passed by a 9–3 vote. There could be a shift toward favoring an increase in rates in future meetings.

Market expectations also leaned toward a rate increase. Currently, CME FedWatch shows the market predicts a high chance of a 25-basis-point hike at the Fed’s September meeting.

Gold

The SPDR Gold Shares ETF (GLD), which tracks the price of gold, finished the week below 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 Quantified Gold Futures Tracking 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 200% net long exposure to the S&P 500. Exposure changed to 130% net long on Friday.

Our QFC Political Seasonality Index strategy was aggressive throughout the week. (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 started the week with a 120% net long exposure to the NASDAQ 100. Exposure changed to 140% net long on Wednesday, 120% net long on Thursday, and 80% net long on Friday.

The Systematic Advantage strategy held a 120% net long exposure to the S&P 500 at the start of the week. Exposure changed to 90% net long on Monday, 120% net long on Tuesday, and 90% net long on Thursday.

Our QFC Self-Adjusting Trend Following Strategy’s primary signal was 0% net long the NASDAQ 100 at the start of the week. Exposure changed to 100% net long on Monday.

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 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.