Market insights and analysis

By Will Hubbard

Market snapshot

•  Stocks: The major market indexes finished in the red as weak jobs data and rising uncertainty weighed on markets. The S&P 500 fell 2.34%, the NASDAQ Composite lost 2.16%, the Dow Jones Industrial Average declined 2.92%, and the Russell 2000 small-capitalization index decreased by 4.16%.

•  Bonds: Yields declined across the board as investors sought safety amid rising rate-cut expectations and signs of economic slowing. The 10-year Treasury yield fell from 4.39% to around 4.22%.

•  Gold: Gold dipped early in the week but rallied on Friday’s jobs report, ending the week up 0.78% at $3,363.48 per ounce.

•  Market indicators and outlook: Strategy positioning was generally bullish. The economic environment is classified as Normal, favoring gold and stocks from a return perspective. Volatility is Low and Falling, a regime historically favorable for stocks over other asset classes.

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Stocks

The end of July appeared uneventful—until Friday’s payroll number surprised the market. Only 73,000 jobs were added in July, well below the 110,000 expected by analysts. Further revisions to May and June data showed fewer jobs than previously reported.

According to Axios, “The economy added just 19,000 in May, not the 144,000 the government initially reported. June job gains were revised down to 14,000, from the 147,000 first estimated. Taken together, employment over the prior two months is 258,000 lower than previously reported. In other words, job creation over the last three months was just 106,000—the lowest rolling three-month total since the pandemic. Excluding 2020, it was the softest three months of job creation since late 2010.”

The Wall Street Journal reported that unemployment ticked up to 4.2%, while wage growth remained strong at 3.9% year over year.

The Bureau of Labor Statistics released the Personal Consumption Expenditure (PCE) report, which tracks changes in the price of goods and services purchased by consumers (excluding food and energy). The report showed a 0.3% increase for the month, in line with expectations.

Meanwhile, Friday’s ISM Manufacturing Purchasing Managers Index (PMI) indicated continued contraction in the manufacturing sector. It was the fifth consecutive month of contraction following a brief two-month respite in the midst of a 33-month downturn. Manufacturing activity is often viewed as a leading economic indicator.

As we enter August, it may be helpful to look to history to set expectations. August is among the most volatile months of the year for the market, posting negative returns 40% of the time since the 1990s. Volatility during August tends to run about 15% higher than the rest of the year. While that may not seem significant, it can be enough to rattle some investors, especially if the month starts in the red.

We’re heading into a period where geopolitical uncertainty may once again dominate. With potential tariff announcements ahead, we could see volatility similar to what occurred in April—possibly worsened by the seasonal swings often associated with the back-to-school period.

Bonds

Despite signs of weakness in manufacturing, the broader economy remains resilient. On Friday, the ICE Bank of America U.S. High-Yield Option-Adjusted Spread Index closed at 3.13%—down from 3.35% a year ago. This narrowing spread indicates investors are increasingly willing to buy riskier fixed-income securities, either because they view the economy as fundamentally strong or because they anticipate a potential rate cut by the Federal Reserve.

As of Friday, the 10-year Treasury yield stood at 4.22%, well below its longer-term average of around 5.25%. The following chart highlights in red where the current option-adjusted high-yield spread sits—near all-time lows.

On Wednesday, the Federal Open Market Committee (FOMC) held rates steady at 4.5%. The committee continues to describe the labor market as “solid,” even amid signs of cooling and ongoing tariff discussions that remain subject to President Trump’s shifting policy tone. The Fed appears to be proceeding cautiously toward any potential rate reduction.  

While equities may be showing signs of strain, the bond market remain optimistic. Keep an eye on macroeconomic data and credit spreads—any cracks in these indicators could be an early warning sign of rising volatility ahead.

Gold

Is gold entering a euphoric phase? After nearly a decade without a sustained rally, gold continues its impressive run. It jumped 1.8% on Friday alone following the weaker-than-expected jobs report and growing expectations for a Fed rate cut. For the week, gold gained 0.78%, ending at $3,363.48 per ounce.

Citigroup raised its three-month forecast for gold to a range of $3,300 to $3,600 per ounce, citing increased demand from central banks. In a recent Reuters article, the bank said, “U.S. growth and tariff-related inflation concerns are set to remain elevated during 2H’25, which alongside a weaker dollar, are set to drive gold moderately higher, to new all-time highs.”

Currently, gold remains in a sideways trading channel. Often, this type of consolidation marks a pause in momentum, allowing new investors to enter. If the macroeconomic backdrop continues to support it, this range could serve as a springboard to new highs, as noted by Citigroup. The following chart shows gold’s price action over the past year, highlighting the current range, which started in April.

Flexible Plan Investments is the subadvisor to the only U.S. gold mutual fund, The Gold Bullion Strategy Fund (QGLDX), designed at its introduction 12 years ago to track the daily price changes in the precious metal.

The indicators

The QFC S&P Pattern Recognition strategy began the week 20% short, shifted to 30% long on Wednesday, moved to 70% short on Thursday, and finished the week 120% long. Our QFC Political Seasonality Index started the week in its risk-on posture and remained there throughout the week. (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 remained 200% long for the entire week. The Systematic Advantage (SA) strategy held a 90% long position throughout the week. Our QFC Self-adjusting Trend Following (QSTF) strategy started the week 200% long, moved to 0% on Thursday’s close, and remained there for the duration of 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 markets are in a Normal economic environment stage (inflation and GDP are growing). Historically, a Normal environment has occurred 60% of the time since 2003. In a Normal climate, gold outperforms stocks and bonds on an annualized return basis, but it also carries the most downside risk. From a risk-adjusted perspective, Normal is one of the best stages for bonds, followed by gold and then stocks.

Our S&P volatility regime is registering a Low and Falling reading. This environment favors stocks over gold and bonds from an annualized return standpoint. Volatility, of course, favors bonds. But stocks are the next best, followed by gold. The Low and Falling combination has occurred 37% of the time since 2003.