The weekly reports include tactical ensemble and strategic allocation updates, a stock market forecast, and analysis of capital markets and price action. To access the full reports, you must subscribe to Premium Articles or Weekly Premium Articles.

Weekly Market Report

1. Performance of tactical ensemble and strategic allocation
2. Price action analysis, weekly market summary, and market forecast
3. Details of tactical ensemble and strategic allocation
4. “Hidden variables” discussion and conclusion

Section 2 covers trends in US and foreign asset performance and an analysis of the drivers of the current bullish dynamic.

1. Performance of tactical ensemble and strategic allocation

Tactical ensemble

For the week ending April 17, 2026, the weekly strategies ensemble (WeeklyReport-WRE) gained 3.2% with equal allocation, without leverage, as compared to a 4.5% gain for the SPY ETF. The SPY ETF is up 4.4% so far this year, while the ensemble has gained 7.4%.

Since January 2022:

• The SPY ETF has gained 61.5%, while the ensemble has gained 65.3%.
• The ensemble has increased by 104.5% with 1.6x leverage.

For open positions and new signals, see Section 3.

We would like to remind new subscribers that from December 18, 2023, to December 29, 2025, the ensemble maintained a long position in gold (GLD ETF) with a 25% allocation. This position gained 115.3% (unleveraged).

Strategic allocation

The SPY ETF gained 4.5% during the week, while the Price Action Lab strategic allocation (PALSA), which was launched late last year, gained 3.5%. Below is the performance since 2020 with annual rebalancing and without leverage.

The SPY ETF is up 4.4% so far this year, while the strategic allocation is up 8.8%.

In Section 3, we include the allocation details and the performance of PALSA when the volatility is matched up to that of the SPY ETF, with 1.7x leverage, which is up 14.9%.

2. Price action analysis, weekly market summary, and market forecast

The S&P 500 index had its best week in a year, rising by 4.5%, and its best three-week performance in six years, surging by 11.9%. These changes caused a recovery from a 9.1% drop and set new all-time highs.

The above weekly chart shows that similar 3-sigma moves in 3 weeks (based on the available sample since 1945) have only happened 13 times in the past, or 0.31% of the time (4,148 weekly bars). Will the stock market rebound continue? Below is our analysis of a few price action patterns.

3. Details of tactical ensemble and strategic allocation

Tactical ensemble (WRE): Positions and new signals

We use two long-only cross-sectional momentum strategies to generate signals for capital markets and factor ETFs.

• The ensemble (WRE) has gained 65.3% since the beginning of 2022 vs. 61.5% for the SPY ETF.
• The ensemble has gained 100.5% with 1.6x leverage (volatility-adjusted basis.)

We have computed the leverage using the weekly performance of the SPY ETF and the weekly report (WRE) since 2017.

Strategic allocation (PALSA)

Performance of unleveraged and leveraged allocations

The volatility of the leveraged strategic allocation is matched up to that of the SPY ETF with 1.7x leverage. Below is the performance since 2020.

After the application of leverage:

• The maximum drawdown and volatility match those of the SPY ETF.
• The annualized return increased from 13.5% to 22.0%.
• The risk-adjusted alpha rose from 4.2% to 6.1%.
• The leveraged allocation’ beta is 0.93, vs. 0.54 for the unleveraged case.

Leverage has the potential to outperform the benchmark but at comparable levels of the risk metrics and should be avoided or significantly lowered if the objective is to limit drawdowns.

Strategic allocation: ETFs and weights

You must sign up for Premium Articles or Weekly Premium Articles in order to view the complete reports.

Particular disclaimer: Charts in this article may refer to price levels. We might not update the charts if market conditions alter price levels or affect any analysis based on them. All charts in this article are for informational purposes only. See the disclaimer for more information.

Disclaimer: These articles are provided for informational purposes only and should not be considered investment advice or actionable content. We do not guarantee the articles’ accuracy, completeness, fitness, or timeliness for any specific purpose. You should never treat the articles as financial advice. The author is not a registered financial advisor; thus, before subscribing, please read our Disclaimer and Terms and Conditions.

Charting and backtesting program: Amibroker. Data provider: Norgate Data

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Weekly Market Report: Hidden Variables was originally published on Price Action Lab

The weekly reports include tactical ensemble and strategic allocation updates, a stock market forecast, and analysis of capital markets and price action. To access the full reports, you must subscribe to Premium Articles or Weekly Premium Articles.

Weekly Market Report

1. Performance of tactical ensemble and strategic allocation
2. Price action analysis, weekly market summary, and market forecast
3. Details of tactical ensemble and strategic allocation
4. “Peak AI” discussion and conclusion

Section 2 covers the technical analysis of the stock market and trends in US and foreign asset performance.

1. Performance of tactical ensemble and strategic allocation

Tactical ensemble

For the week ending April 10, 2026, the weekly strategies ensemble (WeeklyReport-WRE) gained 2.7% with equal allocation, without leverage, as compared to a 3.6% gain for the SPY ETF. The SPY ETF is down 0.1% so far this year, while the ensemble has gained 4.1%.

Since January 2022:

• The SPY ETF has gained 54.5%, while the ensemble has gained 60.2%.
• The ensemble has increased by 96.3% with 1.6x leverage.

We would like to remind new subscribers that from December 18, 2023, to December 29, 2025, the ensemble maintained a long position in gold (GLD ETF) with a 25% allocation. This position gained 115.3% (unleveraged). For open positions and new signals, see Section 3.

Strategic allocation

The SPY ETF gained 3.6% during the week, while the Price Action Lab strategic allocation (PALSA), which was launched late last year, gained 2.5%. Below is the performance since 2020 with annual rebalancing and without leverage.

The SPY ETF is down 0.1% so far this year, while the strategic allocation is up 5.1%.

In Section 3, we include the allocation details and the performance of PALSA when the volatility is matched up to that of the SPY ETF, with 1.7x leverage, which is up 8.6%.

2. Price action analysis, weekly market summary, and market forecast

In the past two weeks, the S&P 500 index visited the attractor level discussed in several recent reports and then rebounded due to the combined effect of verbal interventions and hopes of a ceasefire in the Middle East. The S&P 500 index has gained 7% in the past two weeks. Will the rebound continue? Below is our updated analysis.

3. Details of tactical ensemble and strategic allocation

Tactical ensemble (WRE): Positions and new signals

We use two long-only cross-sectional momentum strategies to generate signals for capital markets and factor ETFs.

• The ensemble (WRE) has gained 60.2% since the beginning of 2022 vs. 54.5% for the SPY ETF.
• The ensemble has gained 96.3% with 1.6x leverage (volatility-adjusted basis.)

We have computed the leverage using the weekly performance of the SPY ETF and the weekly report (WRE) since 2017.

Strategic allocation (PALSA)

Performance of unleveraged and leveraged allocations

The volatility of the leveraged strategic allocation is matched up to that of the SPY ETF with 1.7x leverage. Below is the performance since 2020.

After the application of leverage:

• The maximum drawdown and volatility match those of the SPY ETF.
• The annualized return increases from 12.4% to 21.2%.
• The risk-adjusted alpha rises from 4.1% to 5.9%.
• The leveraged allocation’ beta is 0.93, vs. 0.54 for the unleveraged case.

Leverage has the potential to outperform the benchmark but at comparable levels of the risk metrics and should be avoided or significantly lowered if the objective is to limit drawdowns.

Strategic allocation: ETFs and weights

You must sign up for Premium Articles or Weekly Premium Articles in order to view the complete reports.

Particular disclaimer: Charts in this article may refer to price levels. We might not update the charts if market conditions alter price levels or affect any analysis based on them. All charts in this article are for informational purposes only. See the disclaimer for more information.

Disclaimer: These articles are provided for informational purposes only and should not be considered investment advice or actionable content. We do not guarantee the articles’ accuracy, completeness, fitness, or timeliness for any specific purpose. You should never treat the articles as financial advice. The author is not a registered financial advisor; thus, before subscribing, please read our Disclaimer and Terms and Conditions.

Charting and backtesting program: Amibroker. Data provider: Norgate Data

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Weekly Market Report: Peak AI was originally published on Price Action Lab

We provide below the combined performance of the Dynamic-3 and 0-Beta strategy bundles.

We updated the performance charts on April 9, 2026. The backtests include slippage and a commission of $0.01 per share. For more information about the bundles, click here.

There are a total of five strategies in the bundle combination. Each bundle has three strategies, but they share a common one. The strategies generate signals for liquid ETFs only. The backtest allocates 1/6 of the starting equity to each strategy, with the common strategy receiving double the allocation.

The strategies do not share equity or positions, which is often used to compound performance results. The reason we do not use compounding of this sort is that the backtest represents one time-domain path, and compounding results could drastically differ after another path, thus potentially increasing data mining bias. However, under real trading conditions, a trader could elect to partially compound when appropriate.

Equity performance

Performance metrics and comparison to SPY ETF buy and hold (R_f = 0)

Use the form below to reach out for more information. Please refer to the relevant pages of the bundles for delivery and terms in this recent article.

Disclaimer: The strategies are provided for informational purposes only and do not constitute investment advice or actionable content. We do not warrant the accuracy, completeness, fitness, or timeliness of any strategy for any particular purpose. Under no circumstances should the strategies be treated as financial advice. Please read our Disclaimer and Terms and Conditions.

Copyright notice: Any unauthorized copy, reproduction, distribution, publication, display, modification, or transmission of any part of this report is strictly prohibited without prior written permission.

Combined Performance of Two Strategy Bundles was originally published on Price Action Lab

The weekly reports include tactical ensemble and strategic allocation updates, a stock market forecast, and analysis of capital markets and price action. To access the full reports, you must subscribe to Premium Articles or Weekly Premium Articles.

Weekly Market Report

1. Performance of tactical ensemble and strategic allocation
2. Price action analysis, weekly market summary, and market forecast
3. Details of tactical ensemble and strategic allocation
4. The “Buffett put” and conclusion

Technical analysis of the stock market, a review of a pair trade, the performance of energy commodities and factors, and trends in US and foreign asset performance are all covered in Section 2.

1. Performance of tactical ensemble and strategic allocation

Tactical ensemble

For the week ending April 2, 2026, the weekly strategies ensemble (WeeklyReport-WRE) gained 1.7% with equal allocation, without leverage, as compared to a 3.4% gain for the SPY ETF. The SPY ETF is down 3.6% so far this year, while the ensemble has gained 1.4%.

Since the start of 2022, the SPY ETF has gained 49.2%, while the ensemble has gained 56.1%. The ensemble has increased by 89.7% over the same time with 1.6x leverage. We would like to remind new subscribers that from December 18, 2023, to December 29, 2025, the ensemble maintained a long position in gold (GLD ETF) with a 25% allocation. This position gained 115.3% (unleveraged). For open positions and new signals, see Section 3.

Strategic allocation

The SPY ETF gained 3.4% during the week, while the Price Action Lab strategic allocation (PALSA), which was launched late last year, gained 2.5%. Below is the performance since 2020 with annual rebalancing and without leverage.

The SPY ETF is down 3.6% so far this year, while the strategic allocation is up 2.5%. In Section 3, we include the allocation details and the performance of PALSA when the volatility is matched up to that of the SPY ETF, with 1.7x leverage, which is up 4.2%.

2. Price action analysis, weekly market summary, and market forecast

The S&P 500 index visited the attractor level discussed in several previous weekly reports, and the market rebounded mainly due to the intervention explained in the conclusion at the end of this report. Will the rebound continue? Below is our analysis.

3. Details of tactical ensemble and strategic allocation

Tactical ensemble (WRE): Positions and new signals

We use two long-only cross-sectional momentum strategies to generate signals for capital markets and factor ETFs.

The ensemble (WRE) has gained 56.1% since the beginning of 2022, compared to 49.2% for the SPY ETF. The ensemble with leverage has gained 89.7% with equal allocation and 1.6x leverage on a volatility-adjusted basis. We have computed the leverage using the weekly performance of the SPY ETF and the weekly report (WRE) since 2017.

Strategic allocation (PALSA)

Performance of unleveraged and leveraged allocations

The volatility of the leveraged strategic allocation is matched up to that of the SPY ETF with 1.7x leverage. Below is the performance since 2020.

After the application of leverage, the maximum drawdown and volatility match those of the SPY ETF in the same period, but the annualized return increases from 12.4% to 21.2%, resulting in the risk-adjusted alpha rising from 4% to 5.8%. By design, the leveraged allocation has a high beta, at 0.93, as compared to 0.54 for the unleveraged case. Leverage has the potential to outperform the benchmark but at comparable levels of the risk metrics and should be avoided or significantly lowered if the objective is to limit drawdowns.

Strategic allocation: ETFs and weights

You must sign up for Premium Articles or Weekly Premium Articles in order to view the complete reports.

Particular disclaimer: Charts in this article may refer to price levels. We might not update the charts if market conditions alter price levels or affect any analysis based on them. All charts in this article are for informational purposes only. See the disclaimer for more information.

Disclaimer: These articles are provided for informational purposes only and should not be considered investment advice or actionable content. We do not guarantee the articles’ accuracy, completeness, fitness, or timeliness for any specific purpose. You should never treat the articles as financial advice. The author is not a registered financial advisor; thus, before subscribing, please read our Disclaimer and Terms and Conditions.

Charting and backtesting program: Amibroker. Data provider: Norgate Data

If you found this article interesting, you may follow this blog via RSS, email, or Twitter.

Weekly Market Report: The Buffett Put was originally published on Price Action Lab

The Dynamic-3 and 0-Beta strategy bundles’ updated performance is provided below.

Click here for the latest article, which includes the combined bundle performance.

The performance charts were updated on April 3, 2026, and they include slippage and a commission of $0.01 per share.

Dynamic-3 Bundle

The Sharpe ratio is 1.45. Since 2010, there has only been one negative year, which was -1.2% in 2022. The maximum drawdown is 11.3%, and the CAGR is 11.7%. The beta is 0.18. Click here for more details. 

0-Beta Bundle

The beta is 0.03. The Sharpe ratio is 1.11. Since 2010, there haven’t been any losing years. The maximum drawdown is roughly 11%, and the CAGR is 9.2%. Click here for more details.

Use the form below to get in touch with us for more information and an invoice. Please refer to the relevant pages of the bundles for delivery and terms.

Disclaimer: The strategies are provided for informational purposes only and do not constitute investment advice or actionable content. We do not warrant the accuracy, completeness, fitness, or timeliness of any strategy for any particular purpose. Under no circumstances should the strategies be treated as financial advice. Please read our Disclaimer and Terms and Conditions.

Copyright notice: Any unauthorized copy, reproduction, distribution, publication, display, modification, or transmission of any part of this report is strictly prohibited without prior written permission.

Update: Two Strategy Bundles was originally published on Price Action Lab

This premium report provides an update on the monthly rebalanced Market Signal strategies. A Market Signals subscription provides access to the entire report.

Positions and strategy performance: Tuesday, March 31, 2026

Access the full report with a Market Signals subscription. Hundreds of articles are instantly available to you if you subscribe. Subscribers to Market Signals have instant access to more than 200 articles in the Premium Education section, as well as monthly signals for dynamic momentum and hybrid asset allocation.

Charting and backtesting program: Amibroker. Data provider: Norgate Data

Disclaimer: The Weekly Signals are provided for informational purposes only and do not constitute investment advice or actionable content. We do not warrant the accuracy, completeness, fitness, or timeliness for any particular purpose of the Weekly Signals. Under no circumstances should the premium or weekly signals be treated as financial advice. The author of this website is not a registered financial adviser. Before subscribing, please read our Disclaimer and Terms and Conditions.

Copyright notice: Any unauthorized copy, reproduction, distribution, publication, display, modification, or transmission of any part of this report is strictly prohibited without prior written permission.

Market Signals for April 1, 2026 was originally published on Price Action Lab

The weekly reports include tactical ensemble and strategic allocation updates, a stock market forecast, and analysis of capital markets and price action. To access the full reports, you must subscribe to Premium Articles or Weekly Premium Articles.

Weekly Market Report

1. Performance of tactical ensemble and strategic allocation
2. Price action analysis, weekly market summary, and market forecast
3. Details of tactical ensemble and strategic allocation
4. Conclusion

Technical analysis of the stock market, the performance of energy commodities and factors, and trends in US and foreign asset performance are all covered in Section 2.

1. Performance of tactical ensemble and strategic allocation

Tactical ensemble

For the week ending March 27, 2026, the weekly strategies ensemble (WeeklyReport-WRE) gained 0.3% with equal allocation, without leverage, as compared to a 2.2% loss for the SPY ETF. The SPY ETF has dropped 6.7% so far this year, while the ensemble has dropped 0.3%.

Since the start of 2022, the SPY ETF has gained 44.2%, while the ensemble has gained 54.3%. The ensemble has increased by 86.9% over the same time period with 1.6x leverage. We would like to remind new subscribers that from December 18, 2023, to December 29, 2025, the ensemble maintained a long position in gold (GLD ETF) with a 25% allocation. This position gained 115.3% (unleveraged). For open positions and any new signals, see Section 3.

Strategic allocation

The SPY ETF dropped 2.2% during the week, while the Price Action Lab strategic allocation (PALSA), which was launched late last year, dropped 1%. Below is the performance since 2020 with annual rebalancing and without leverage.

The SPY ETF has lost 6.7% so far this year, while the strategic allocation remains unchanged. In Section 3, we include the allocation details and the performance of PALSA when the volatility is matched up to that of the SPY ETF, with 1.7x leverage.

2. Price action analysis, weekly market summary, and market forecast

We have chosen a chart with an unconventional indicator for this week’s report because we think it has some significance in the current price action regime and might offer a higher signal-to-noise ratio. We also look at the dynamics of a popular pair trade over the last five years.

3. Details of tactical ensemble and strategic allocation

Tactical ensemble (WRE): Positions and new signals

We use two long-only cross-sectional momentum strategies to generate signals for capital markets and factor ETFs.

The ensemble (WRE) has gained 54.3% since the beginning of 2022, compared to 44.2% for the SPY ETF. Between December 18, 2023, and December 29, 2025, the ensemble held a long position in gold (GLD ETF) with a 25% allocation; this position gained 115.3% (unleveraged). 

While the SPY ETF has gained 44.2% since 2022, the weekly strategies (WRE x 1.6) have gained 86.9% with equal allocation and 1.6x leverage on a volatility-adjusted basis. We have computed the leverage using the weekly performance of the SPY ETF and the weekly report (WRE) since 2017.

Strategic allocation (PALSA)

Performance of unleveraged and leveraged allocations

The volatility of the leveraged strategic allocation is matched up to that of the SPY ETF with 1.7x leverage. Below is the performance since 2020.

After the application of leverage, the maximum drawdown and volatility match those of the SPY ETF in the same period, but the annualized return increases from 12.1% to 19.6%, resulting in the risk-adjusted alpha rising from 3.9% to 5.7%. By design, the leveraged allocation has a high beta, at 0.92, as compared to 0.54 for the unleveraged case. Leverage has the potential to outperform the benchmark but at comparable levels of the risk metrics and should be avoided or significantly lowered if the objective is to limit drawdowns.

Strategic allocation: ETFs and weights

You must sign up for Premium Articles or Weekly Premium Articles in order to view the complete reports.

Particular disclaimer: Charts in this article may refer to price levels. We might not update the charts if market conditions alter price levels or any analysis based on them. All charts in this article are for informational purposes only. See the disclaimer for more information.

Disclaimer: These articles are provided for informational purposes only and should not be considered investment advice or actionable content. We do not guarantee the articles’ accuracy, completeness, fitness, or timeliness for any specific purpose. You should never treat the articles as financial advice. The author is not a registered financial advisor; thus, before subscribing, please read our Disclaimer and Terms and Conditions.

Charting and backtesting program: Amibroker. Data provider: Norgate Data

If you found this article interesting, you may follow this blog via RSS, email, or Twitter.

Weekly Market Report: Mission Accomplished was originally published on Price Action Lab

Blogs and mainstream media articles clearly show that many, if not most, market analysts misunderstand why gold had an explosive rally and, more importantly, why it recently fell. Short answer: gold fell because it served its purpose. Counterintuitive? Read below.

The claim that gold fell because it served its purpose is counterintuitive, but it is what actually happened. But first, let’s look at the chart, and then I’ll make this brief.

Gold did not gain much during the lockdowns or after the Ukraine invasion; in fact, it fell after the war started in Europe.

The rally in gold started with fears about dedollarization and a rise in US public debt and accelerated with the 12-day Iran war on June 12, 2025.

Gold does not serve as a hedge; rather, it functions as another asset for diversification, influenced by various factors. Gold is also considered a “safe haven” asset in the case of a major catastrophe.

Some analysts wonder why gold has fallen about 17% from its all-time closing highs amid escalating tension in the Middle East. The answer is that it fell because it served its purpose. And what was the purpose? The main purpose was to use gold to cover losses from financial and other assets, which is precisely what is happening right now.

Gold fulfilled its purpose for those who conducted thorough research and recognized that the initial strike on Iran was merely the commencement of a larger operation. Most market analysts use first-order logic that is useful for everyday mundane tasks. When it comes to geopolitics, bluffing and other tactics contaminate the premises of first-order logic with noise, and conclusions are almost always wrong. For these reasons, the best way to invest in gold is via systematic strategies that eliminate sentiment and simple logic but operate based on price action. However, systematic strategies are not a panacea and are more difficult to develop and implement than some people think.

Conclusion: Gold served its purpose, and this is the reason it is now falling. If gold begins to rise again, it could indicate that some astute market participants have once again done their homework.

Disclaimer: These articles are intended for informational purposes only and should not be considered investment advice or actionable content. We do not warrant the accuracy, completeness, fitness, or timeliness for any particular purposes of the articles. You should never treat the articles as financial advice. The author is not a registered financial advisor; therefore, before subscribing, please read our Disclaimer and Terms and Conditions.

Charting and backtesting program: Amibroker. Data provider: Norgate Data

You may follow this blog via RSS, email, or Twitter.

Gold Fell Because it Served its Purpose was originally published on Price Action Lab

The weekly reports include tactical ensemble and strategic allocation updates, a stock market forecast, and analysis of capital markets and price action. To access the full reports, you must subscribe to Premium Articles or Weekly Premium Articles.

Weekly Market Report

1. Performance of tactical ensemble and strategic allocation
2. Weekly market summary, price action analysis, and market forecast
3. Details of tactical ensemble and strategic allocation
4. Conclusion

Section 2 includes an analysis of stock market technicals, performance of factors and energy commodities, and US and international asset performance trends.

1. Performance of tactical ensemble and strategic allocation

Tactical ensemble

For the week ending March 20, 2026, the weekly strategies ensemble (WeeklyReport-WRE) fell 0.8% with equal allocation, without leverage, as compared to a 1.8% loss for the SPY ETF. Year-to-date, the ensemble is down 0.6%, while the SPY ETF is down 4.6%.

The ensemble has gained 53.9% since the beginning of 2022, while the SPY ETF has increased by 47.5%. With 1.6x leverage, the ensemble has gained 86.2% in the same period. We remind new subscribers that the ensemble held a long position in gold (GLD ETF) with a 25% allocation from December 18, 2023, to December 29, 2025, and this position gained 115.3% (unleveraged). See Section 3 for open positions and any new signals.

Strategic allocation

The Price Action Lab strategic allocation (PALSA), which was introduced late last year, fell 2.9% for the week, while the SPY ETF fell 1.8%. Below is the performance since 2020 with annual rebalancing and without leverage.

The year-to-date return is 1%. In Section 3, we include the allocation details and the performance of PALSA when the volatility is matched up to that of the SPY ETF, with 1.7x leverage. The year-to-date return is 1.7%.

2. Weekly market summary, price action analysis, and market forecast

3. Details of tactical ensemble and strategic allocation

Tactical ensemble (WRE): Positions and new signals

We use two long-only cross-sectional momentum strategies to generate signals for capital markets and factor ETFs.

The ensemble (WRE) has gained 53.9% since the beginning of 2022, while the SPY ETF has increased by 47.5%. The ensemble maintained a long position in gold (GLD ETF) with a 25% allocation from December 18, 2023, to December 29, 2025, and this position gained 115.3% (unleveraged). 

Since 2022, on a volatility-adjusted basis, the weekly strategies (WRE x1.6) have increased by 86.2% with equal allocation and 1.6x leverage, as compared to a 47.5% gain for the SPY ETF. We calculate the leverage based on weekly performance for the weekly report (WRE) and SPY ETF since 2017.

Strategic allocation (PALSA)

Performance of unleveraged and leveraged allocations

The volatility of the leveraged strategic allocation is matched up to that of the SPY ETF with 1.7x leverage. Below is the performance since 2020.

After the application of leverage, the maximum drawdown and volatility match those of the SPY ETF in the same period, but the annualized return increases from 12.3% to 20%, resulting in the risk-adjusted alpha rising from 3.9% to 5.7%. By design, the leveraged allocation has a high beta, at 0.92, as compared to 0.54 for the unleveraged case. Leverage has the potential to outperform the benchmark but at comparable levels of the risk metrics and should be avoided, or significantly lowered, if the objective is to limit drawdowns.

Strategic allocation: ETFs and weights

To access the full reports, you must subscribe to Premium Articles or Weekly Premium Articles.

Specific disclaimer: This article includes charts that may reference price levels. If market conditions change the price levels or any analysis based on them, we may not update the charts. All charts in this article are for informational purposes only. See the disclaimer for more information.

Disclaimer: These articles are intended for informational purposes only and should not be considered as investment advice or actionable content. We do not warrant the accuracy, completeness, fitness, or timeliness for any particular purposes of the articles. You should never treat the articles as financial advice. The author is not a registered financial advisor; therefore, before subscribing, please read our Disclaimer and Terms and Conditions.

Charting and backtesting program: Amibroker. Data provider: Norgate Data

If you found this article interesting, you may follow this blog via RSS, email, or Twitter.

Weekly Market Report: The Elusive Search for a Hedge was originally published on Price Action Lab

The update is for Premium Articles subscribers. To access the report, you must subscribe to Premium Articles.

The following is the most important question that smart traders and investors have about this war in the Middle East:

Disclaimer: These articles are intended for informational purposes only and should not be considered as investment advice or actionable content. We do not warrant the accuracy, completeness, fitness, or timeliness for any particular purposes of the articles. You should never treat the articles as financial advice. The author is not a registered financial advisor; therefore, before subscribing, please read our Disclaimer and Terms and Conditions.

Charting and backtesting program: Amibroker. Data provider: Norgate Data

Price Action Lab Alert: Decision Making, Gold, and Equities was originally published on Price Action Lab

The weekly reports include tactical ensemble and strategic allocation updates, a stock market forecast, and analysis of capital markets and price action. To access the full reports, you must subscribe to Premium Articles or Weekly Premium Articles.

Weekly Market Report

1. Performance of tactical ensemble and strategic allocation
2. Weekly market summary, price action analysis, and market forecast
3. Details of tactical ensemble and strategic allocation
4. Conclusion

Section 2 includes an analysis of stock market technicals, performance of factors and energy commodities, and US and international asset performance trends.

1. Performance of tactical ensemble and strategic allocation

Tactical ensemble

For the week ending March 13, 2026, the weekly strategies ensemble (WeeklyReport-WRE) fell 1.3% with equal allocation, without leverage, as compared to a 1.5% loss for the SPY ETF. Year-to-date, the ensemble is up 0.2%. The SPY ETF is down 2.9%.

The ensemble has gained 55.1% since the beginning of 2022, while the SPY ETF has increased by 50.2%. With 1.6x leverage, the ensemble has gained 88.2% in the same period. The ensemble maintained a long position in gold (GLD ETF) with a 25% allocation from December 18, 2023, to December 29, 2025, and this position gained 115.3% (unleveraged). See Section 3 for open positions and any new signals.

Strategic allocation

The Price Action Lab strategic allocation (PALSA), which was introduced late last year, fell 1% for the week, while the SPY ETF fell 1.6%. Below is the performance since 2020 with annual rebalancing and without leverage.

The year-to-date return is 4%. In Section 3, we include the allocation details and the performance of PALSA when the volatility is matched up to that of the SPY ETF, with 1.7x leverage. The year-to-date return is 6.8%.

2. Weekly market summary, price action analysis, and market forecast

3. Details of tactical ensemble and strategic allocation

Tactical ensemble (WRE): Positions and new signals

We use two long-only cross-sectional momentum strategies to generate signals for capital markets and factor ETFs.

The ensemble (WRE) has gained 55.1% since the beginning of 2022, while the SPY ETF has increased by 50.2%. The ensemble maintained a long position in gold (GLD ETF) with a 25% allocation from December 18, 2023, to December 29, 2025, and this position gained 115.3% (unleveraged). 

Since 2022, on a volatility-adjusted basis, the weekly strategies (WRE x1.6) have increased by 88.2% with equal allocation and 1.6x leverage, as compared to a 50.2% gain for the SPY ETF. We calculate the leverage based on weekly performance for the weekly report (WRE) and SPY ETF since 2017.

Strategic allocation (PALSA)

Performance of unleveraged and leveraged allocations

The volatility of the leveraged strategic allocation is matched up to that of the SPY ETF with 1.7x leverage. Below is the performance since 2020.

After the application of leverage, the maximum drawdown and volatility match those of the SPY ETF in the same period, but the annualized return increases from 12.9% to 21%, resulting in a risk-adjusted alpha of 7.1%. By design, the leveraged allocation has a high beta, at 0.91, as compared to 0.53 for the unleveraged case. Leverage has the potential to outperform the benchmark but at comparable levels of the risk metrics and should be avoided, or significantly lowered, if the objective is to limit drawdowns.

Strategic allocation: ETFs and weights

To access the full reports, you must subscribe to Premium Articles or Weekly Premium Articles.

Specific disclaimer: This article includes charts that may reference price levels. If market conditions change the price levels or any analysis based on them, we may not update the charts. All charts in this article are for informational purposes only. See the disclaimer for more information.

Disclaimer: These articles are intended for informational purposes only and should not be considered as investment advice or actionable content. We do not warrant the accuracy, completeness, fitness, or timeliness for any particular purposes of the articles. You should never treat the articles as financial advice. The author is not a registered financial advisor; therefore, before subscribing, please read our Disclaimer and Terms and Conditions.

Charting and backtesting program: Amibroker. Data provider: Norgate Data

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Weekly Market Report: In Search of an Off-Ramp was originally published on Price Action Lab

The Concord fallacy not only applies to trading and investing but also to financial newsletter subscriptions.

During times of market turmoil, some traders and investors not only exit profitable positions and continue to hold the unprofitable ones but also terminate profitable subscriptions to newsletters and double down on those that may have contributed to the losses.

The Concord fallacy, also referred to as the sunk cost fallacy, arises when investors choose to continue financing a losing project due to the significant time and funds they have already invested.

In trading and investing, it is understood that most retail participants in the market operate under the influence of the sunk cost fallacy and tend to sell winners while holding losers. The drivers of this fallacy and how it became dominant are complex but usually are due to, among others,

• fear that winners will also lose money.
• hope that losers will recover.
• resistance to accepting losses (ego).

What is less understood is that the sunk cost fallacy is also dominant in the newsletter subscription space in a similar way as in trading and investing.

During market turmoil, some newsletter subscribers cannot afford to pay for several subscriptions and decide to sell those that have already made money because of misapplication of the concept of mean reversion.

Mean reversion is not a well-understood dynamic because, unlike trend-following, which is a simpler concept but hard in execution, it has many different variants and applications in the markets. But more importantly, mean reversion refers to a positive long-term expectation despite the risk of sustaining occasional large losses, which are actually due to mean reversion.

We can’t elaborate on mean reversion here, but we’ve done so in other blog posts. Needless to say, a large number of newsletter providers do not also appear to understand mean reversion. Let’s emphasize that mean reversion is not about the next trade. If the reader sees this attempt anywhere, they must be cautious because there is an apparent confusion between time-domain and ensemble analysis; mean reversion is about a positive long-term expectation. The misapplication of the concept is usually the result of some effort to mix quantitative flavor with discretionary analysis, which is common in some newsletters where the authors do not have a quantitative background.

In addition to the misapplication of mean reversion, many market participants continue to subscribe to newsletters that may also misapply mean reversion, despite experiencing losses for various other reasons.

• The subscription cost is high (escalation of commitment).
• The newsletter authors use social engagement tactics.

The author remembers the case of a friend who was working for a bank, and they had a subscription to an expensive newsletter. The newsletter authors, some of them with Ph.D. qualifications, insisted around 2010 that because of quantitative easing, bond yields would rally, and that would cause the stock market to crash to the 2009 bottom or even lower. Despite continuing losses, the bank did not terminate the newsletter subscription due to a large investment already made. But here comes the intriguing part:

The authors of the newsletter frequently called the bank and stayed on top of market discussions despite their contrarian views, also sharing information about trips, families, etc., to create a bond that would reduce the chances of subscription cancellation. My friend understood that they were following the wrong people and on many occasions asked for my opinion. I tried to explain that those Ph.D.s probably had excellent academic records but limited hours of screen time and market experience. The result was that the bank team was fired at some point, and my friend had to look elsewhere to start a business. He is an outstanding person, and with the right guidance from the right people in a different field I do not have much experience in, he became very successful. Some other people from that team probably were not as successful.

A red flag

Intense and frequent social media engagement may be a sign of underlying weakness. Some years ago, a social media follower contacted me to say that the losses from following a newsletter were large, but the author was heavily invested in public relations. Despite this, I have strong indications that this follower remains a subscriber of that newsletter due to the sunk cost fallacy and other cognitive biases reinforced by marketing tactics, which I will not mention here in detail.

Summary

Some newsletters are beneficial, and some are detrimental. Maintaining a newsletter subscription despite losses, under intense social engagement and marketing tactics, may indicate that sunk cost and other cognitive fallacies are playing a dominant role in the decision-making process.

Disclaimer: These articles are intended for informational purposes only and should not be considered as investment advice or actionable content. We do not warrant the accuracy, completeness, fitness, or timeliness for any particular purposes of the articles. You should never treat the articles as financial advice. The author is not a registered financial advisor; therefore, before subscribing, please read our Disclaimer and Terms and Conditions.

Charting and backtesting program: Amibroker. Data provider: Norgate Data

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The Concord Fallacy in Markets and Financial Newsletters was originally published on Price Action Lab

The weekly reports include tactical ensemble and strategic allocation updates, a stock market forecast, and analysis of capital markets and price action. To access the full reports, you must subscribe to Premium Articles or Weekly Premium Articles.

Weekly Market Report

1. Performance of tactical ensemble and strategic allocation
2. Weekly market summary, price action analysis, and market forecast
3. Details of tactical ensemble and strategic allocation
4. Conclusion

Section 2 includes an analysis of stock market technicals, performance of factors and energy commodities, and US and international asset performance trends.

1. Performance of tactical ensemble and strategic allocation

Tactical ensemble

For the week ending March 6, 2026, the weekly strategies ensemble (WeeklyReport-WRE) fell 2.8% with equal allocation, without leverage, as compared to a 2% loss for the SPY ETF. The year-to-date return of the ensemble is 1.5%. With 1.6x leverage, the year-to-date return is 2.4%. The SPY ETF is down 1.4%.

The ensemble has gained 57.2% since the beginning of 2022, while the SPY ETF has increased by 52.5%. With 1.6x leverage, the ensemble has gained 91.5% in the same period. The ensemble maintained a long position in gold (GLD ETF) with a 25% allocation from December 18, 2023, to December 29, 2025, and this position gained 115.3% (unleveraged). See Section 3 for open positions and any new signals.

Strategic allocation

The Price Action Lab strategic allocation (PALSA), which was introduced late last year, fell 2.5% for the week, while the SPY ETF fell 2%. Below is the performance since 2020 with annual rebalancing and without leverage.

The year-to-date return is 5.1%. In Section 3, we include the allocation details and the performance of PALSA when the volatility is matched up to that of the SPY ETF, with 1.7x leverage. The year-to-date return is 8.6%.

2. Weekly market summary, price action analysis, and market forecast

3. Details of tactical ensemble and strategic allocation

Tactical ensemble (WRE): Positions and new signals

We use two long-only cross-sectional momentum strategies to generate signals for capital markets and factor ETFs.

The ensemble (WRE) has gained 57.2% since the beginning of 2022, while the SPY ETF has increased by 55.2%. The ensemble maintained a long position in gold (GLD ETF) with a 25% allocation from December 18, 2023, to December 29, 2025, and this position gained 115.3% (unleveraged). 

Since 2022, on a volatility-adjusted basis, the weekly strategies (WRE x1.6) have increased by 91.5% with equal allocation and 1.6x leverage, as compared to a 52.5% gain for the SPY ETF. We calculate the leverage based on weekly performance for the weekly report (WRE) and SPY ETF since 2017.

Strategic allocation (PALSA)

Performance of unleveraged and leveraged allocations

The volatility of the leveraged strategic allocation is matched up to that of the SPY ETF with 1.7x leverage. Below is the performance since 2020.

After the application of leverage, the maximum drawdown and volatility match those of the SPY ETF in the same period, but the annualized return increases from 13.1% to 21.4%, resulting in a risk-adjusted alpha of 7.2%. By design, the leveraged allocation has a high beta, at 0.91, as compared to 0.53 for the unleveraged case. Leverage has the potential to outperform the benchmark but at comparable levels of the risk metrics and should be avoided, or significantly lowered, if the objective is to limit drawdowns.

Strategic allocation: ETFs and weights

To access the full reports, you must subscribe to Premium Articles or Weekly Premium Articles.

Specific disclaimer: This article includes charts that may reference price levels. If market conditions change the price levels or any analysis based on them, we may not update the charts. All charts in this article are for informational purposes only. See the disclaimer for more information.

Disclaimer: These articles are intended for informational purposes only and should not be considered as investment advice or actionable content. We do not warrant the accuracy, completeness, fitness, or timeliness for any particular purposes of the articles. You should never treat the articles as financial advice. The author is not a registered financial advisor; therefore, before subscribing, please read our Disclaimer and Terms and Conditions.

Charting and backtesting program: Amibroker. Data provider: Norgate Data

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Weekly Market Report: Between a Rock and a Hard Place was originally published on Price Action Lab

The update includes ETFs, equities, and commodity futures contracts. We provide an overview of the current major market risk. To access the full report, you must subscribe to Premium Articles.

We start with the ETFs we track.

Disclaimer: These articles are intended for informational purposes only and should not be considered as investment advice or actionable content. We do not warrant the accuracy, completeness, fitness, or timeliness for any particular purposes of the articles. You should never treat the articles as financial advice. The author is not a registered financial advisor; therefore, before subscribing, please read our Disclaimer and Terms and Conditions.

Charting and backtesting program: Amibroker. Data provider: Norgate Data

Price Action Lab Update: State of the Markets was originally published on Price Action Lab

The weekly reports include tactical ensemble and strategic allocation updates, a stock market forecast, and analysis of capital markets and price action. To access the full reports, you must subscribe to Premium Articles or Weekly Premium Articles.

Weekly Market Report

1. Performance of tactical ensemble and strategic allocation
2. Weekly market summary, price action analysis, and market forecast
3. Details of tactical ensemble and strategic allocation
4. Conclusion

Section 2 includes an analysis of stock market technicals and US and international asset performance trends.

1. Performance of tactical ensemble and strategic allocation

Tactical ensemble

For the week ending February 27, 2026, the weekly strategies ensemble (WeeklyReport-WRE) gained 0.1% with equal allocation, without leverage, as compared to a 0.5% loss for the SPY ETF. The year-to-date return of the ensemble is 4.3%. With 1.6x leverage, the year-to-date return is 6.9%.

The ensemble has gained 61.7% since the beginning of 2022, while the SPY ETF has increased by 55.6%. With 1.6x leverage, the ensemble has gained 98.5% in the same period. The ensemble maintained a long position in gold (GLD ETF) with a 25% allocation from December 18, 2023, to December 29, 2025, and this position gained 115.3% (unleveraged). See Section 3 for open positions and any new signals.

Strategic allocation

The Price Action Lab strategic allocation (PALSA), which was introduced late last year, gained 0.8% for the week, while the SPY ETF fell 0.5%. Below is the performance since 2020 with annual rebalancing and without leverage.

The year-to-date return is 7.7%. In Section 3, we include the allocation details and the performance of PALSA when the volatility is matched up to that of the SPY ETF, with 1.7x leverage. The year-to-date return is 13.1%.

2. Weekly market summary, price action analysis, and market forecast

3. Details of tactical ensemble and strategic allocation

Tactical ensemble (WRE): Positions and new signals

We use two long-only cross-sectional momentum strategies to generate signals for capital markets and factor ETFs.

The ensemble (WRE) has gained 61.7% since the beginning of 2022, while the SPY ETF has increased by 56.4%. The ensemble maintained a long position in gold (GLD ETF) with a 25% allocation from December 18, 2023, to December 29, 2025, and this position gained 115.3% (unleveraged). 

Since 2022, on a volatility-adjusted basis, the weekly strategies (WRE x1.6) have increased by 98.5% with equal allocation and 1.6x leverage, as compared to a 56.4% gain for the SPY ETF. We calculate the leverage based on weekly performance for the weekly report (WRE) and SPY ETF since 2017.

Strategic allocation (PALSA)

Performance of unleveraged and leveraged allocations

The volatility of the leveraged strategic allocation is matched up to that of the SPY ETF with 1.7x leverage. Below is the performance since 2020.

After the application of leverage, the maximum drawdown and volatility match those of the SPY ETF in the same period, but the annualized return increases from 13.7% to 22.2%, resulting in a risk-adjusted alpha of 7.5%. By design, the leveraged allocation has a high beta, at 0.91, as compared to 0.53 for the unleveraged case. Leverage has the potential to outperform the benchmark but at comparable levels of the risk metrics and should be avoided, or significantly lowered, if the objective is to limit drawdowns.

Strategic allocation: ETFs and weights

To access the full reports, you must subscribe to Premium Articles or Weekly Premium Articles.

Specific disclaimer: This article includes charts that may reference price levels. If market conditions change the price levels or any analysis based on them, we may not update the charts. All charts in this article are for informational purposes only. See the disclaimer for more information.

Disclaimer: These articles are intended for informational purposes only and should not be considered as investment advice or actionable content. We do not warrant the accuracy, completeness, fitness, or timeliness for any particular purposes of the articles. You should never treat the articles as financial advice. The author is not a registered financial advisor; therefore, before subscribing, please read our Disclaimer and Terms and Conditions.

Charting and backtesting program: Amibroker. Data provider: Norgate Data

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Weekly Market Report: Weekend Wars was originally published on Price Action Lab

Price Action Lab has issued an alert. To access the full report, you must subscribe to Premium Articles.

Below is one of the most important charts of the US stock market. The chart reflects current and past stock market dynamics and provides a few post hoc realizations about performance drivers and risks.

Disclaimer: These articles are intended for informational purposes only and should not be considered as investment advice or actionable content. We do not warrant the accuracy, completeness, fitness, or timeliness for any particular purposes of the articles. You should never treat the articles as financial advice. The author is not a registered financial advisor; therefore, before subscribing, please read our Disclaimer and Terms and Conditions.

Charting and backtesting program: Amibroker. Data provider: Norgate Data

Price Action Lab Alert: An Important Chart was originally published on Price Action Lab

We look at how the performance of a weekly mean reversion strategy is affected by various index constituents, including Norgate data, which also includes data from delisted securities.

Norgate data offers a large collection of index series with delistings. Below I include a list for US equities, and I might have missed a few.

List of Norgate Data series with delistings for US equities

The objective of this article is to analyze the relative impact of index constituents on the performance of a weekly mean-reversion strategy for equities. For this purpose, we chose a strategy we have developed in the past for Dow-30 stocks. We are not developing a strategy here; we are just looking at how the performance varies when different index constituents are added and subtracted.

The strategy trades a maximum of 6 stocks every week at the open based on a mean-reversion algo and a simple ranking function to sort the signals for significance. Below is the performance since 2005 with the Dow-30 stocks, taking into account delistings.

Next, we apply the same strategy to S&P 100 stocks but exclude the Dow-30 stocks in the code. The result is shown below.

The annualized return and the Sharpe ratio are much lower, and the maximum drawdown is significantly higher. More importantly, the equity curve volatility increased from 12.5% to 14.3%. The information we get from this test is that S&P 100 minus Dow-30 has a lower mean-reversion signal in the weekly timeframe.

Next we repeat the backtest from NASDAQ-100 stocks, always with delistings, minus Dow-30 stocks.

The results are similar to those with the S&P 100 index: The annualized return and the Sharpe ratio are much lower, and the maximum drawdown is significantly higher. After 2020, the performance is better due to a special regime for tech stocks.

Next, we backtest using S&P 500 index stocks, including delistings, minus the Dow-30 stocks.

The results remain degraded, even though a random jump occurred in 2020, probably as a result of the economic stimulus. The equity curve is far from the smooth performance of the original backtest with the Dow-30 stocks.

We conclude that, except for some random periods due to special regimes, such as in 2020, in the weekly time frame, Dow-30 stocks have a more robust signal-to-noise ratio for mean reversion.

This article showed a simple example of analyzing the relative impact of different index constituents on the performance of a simple strategy. With the many Norgate data series that include delistings and possible strategies, using more advanced methods for different indexes could help improve the signal-to-noise ratio and even create chances for arbitrage opportunities.

Disclaimer: These articles are intended for informational purposes only and should not be considered as investment advice or actionable content. We do not warrant the accuracy, completeness, fitness, or timeliness for any particular purposes of the articles. You should never treat the articles as financial advice. The author is not a registered financial advisor; therefore, before subscribing, please read our Disclaimer and Terms and Conditions.

Charting and backtesting program: Amibroker. Data provider: Norgate Data

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Index Constituent Impact on Strategy Performance Using Norgate Data with Delistings was originally published on Price Action Lab

The weekly reports include tactical ensemble and strategic allocation updates, a stock market forecast, and analysis of capital markets and price action. To access the full reports, you must subscribe to Premium Articles or Weekly Premium Articles.

Weekly Market Report

1. Performance of tactical ensemble and strategic allocation
2. Weekly market summary, price action analysis, and market forecast
3. Details of tactical ensemble and strategic allocation
4. Conclusion

Section 2 includes a discussion about current geopolitics, preliminary results from a geopolitical risk premium indicator, and US and international asset performance trends.

1. Performance of tactical ensemble and strategic allocation

Tactical ensemble

For the week ending February 20, 2026, the weekly strategies ensemble (WeeklyReport-WRE) gained 0.6% with equal allocation, without leverage, as compared to a 1.1% gain for the SPY ETF. The year-to-date return of the ensemble is 4.2%. With 1.6x leverage, the year-to-date return is 6.7%.

The ensemble has gained 61.5% since the beginning of 2022, while the SPY ETF has increased by 56.4%. With 1.6x leverage, the ensemble has gained 98.5% in the same period. The ensemble maintained a long position in gold (GLD ETF) with a 25% allocation from December 18, 2023, to December 29, 2025, and this position gained 115.3% (unleveraged). See Section 3 for open positions and any new signals.

Strategic allocation

The Price Action Lab strategic allocation (PALSA), which was introduced late last year, gained 0.8% for the week, while the SPY ETF gained 1.1%. Below is the performance since 2020 with annual rebalancing and without leverage.

The year-to-date return is 6.9%. In Section 3, we include the allocation details and the performance of PALSA when the volatility is matched up to that of the SPY ETF, with 1.7x leverage. The year-to-date return is 11.7%.

2. Weekly market summary, price action analysis, and market forecast

3. Details of tactical ensemble and strategic allocation

Tactical ensemble (WRE): Positions and new signals

We use two long-only cross-sectional momentum strategies to generate signals for capital markets and factor ETFs.

The ensemble (WRE) has gained 61.5% since the beginning of 2022, while the SPY ETF has increased by 56.4%. The ensemble maintained a long position in gold (GLD ETF) with a 25% allocation from December 18, 2023, to December 29, 2025, and this position gained 115.3% (unleveraged). 

Since 2022, on a volatility-adjusted basis, the weekly strategies (WRE x1.6) have increased by 98.5% with equal allocation and 1.6x leverage, as compared to a 56.4% gain for the SPY ETF. We calculate the leverage based on weekly performance for the weekly report (WRE) and SPY ETF since 2017.

Strategic allocation

Performance of unleveraged and leveraged allocations

The volatility of the leveraged strategic allocation is matched up to that of the SPY ETF with 1.7x leverage. Below is the performance since 2020.

After the application of leverage, the maximum drawdown and volatility match those of the SPY ETF in the same period, but the annualized return increases from 13.5% to 22.1%, resulting in a risk-adjusted alpha of 7.3%. However, note that, by design, the leveraged allocation has a high beta, at 0.91, as compared to 0.53 for the unleveraged case. Leverage has the potential to outperform the benchmark but at comparable levels of the risk metrics and should be avoided, or significantly lowered, if the objective is to limit drawdowns.

Strategic allocation: ETFs and weights

To access the full reports, you must subscribe to Premium Articles or Weekly Premium Articles.

Specific disclaimer: This article includes charts that may reference price levels. If market conditions change the price levels or any analysis based on them, we may not update the charts. All charts in this article are for informational purposes only. See the disclaimer for more information.

Disclaimer: These articles are intended for informational purposes only and should not be considered as investment advice or actionable content. We do not warrant the accuracy, completeness, fitness, or timeliness for any particular purposes of the articles. You should never treat the articles as financial advice. The author is not a registered financial advisor; therefore, before subscribing, please read our Disclaimer and Terms and Conditions.

Charting and backtesting program: Amibroker. Data provider: Norgate Data

If you found this article interesting, you may follow this blog via RSS, email, or Twitter.

Weekly Market Report: The Year of the Fire Horse was originally published on Price Action Lab

Quantitative easing boosted equities, suppressed bonds, and drove many investors to gold. Will investors ever forget and return to fixed income markets?

A fancy analysis is not required; all someone needs is to look at the chart below, because performance is what matters, rather than narratives.

• 2010—present: SPY +720.8%, GLD +327%, TLT +58.5%, IEF +56.5%.
• 2016—present: SPY +297.2%, GLD +351.7%, TLT -2.4%, IEF +14.8%.
• 2022—present: SPY +52.8%, GLD +168%, TLT -30.2%, IEF -4.5%.

The economic policies boosted equities at the expense of bonds with medium-term (IEF) and long (TLT) duration. Fixed-income investors saw gold (GLD) skyrocketing. Equity investors have underperformed gold by a wide margin since 2022.

Will fixed-income investors return to the bond market? As long as the same policies that boost equities through inflationary measures, such as deficit spending, remain in place, a return to fixed income is unlikely. Geopolitical strategies amplify the adverse conditions in the bond market by causing some degree of dedollarization. In fact, there is a dual shock wave that has impacted bonds: deficit spending and geopolitics. Investors prefer stocks and gold and shy away from bonds.

What will it take for investors to return to the bond market? The answer may be simple, and no fancy analysis is required: the policies that resulted in exploding deficits and dedollarization must be changed or even reversed. But there is a catch now.

If conditions arise for a significant bond market rebound, investors will rebalance portfolios and will sell gold and equities to buy fixed-income securities. Forecasts and the economic outlook will determine the impact of these sales on stocks and gold. But if deficit spending is used to maintain the uptrends, equities may have to drop, which will support gold and worsen bond issues.

Eventually, if the current policies persist, the Fed will have to buy bonds again to suppress interest rates in the long end of the yield curve. This could potentially create a vicious cycle and increase the pressure on the bond market.

If the plan is to force insurance companies to consider investing in AI and other speculative stocks rather than in bonds that offer predictable streams of cash flows, then we are looking at another level of complexity and potential problems.

All in all, it appears that a return of investors to the bond market will be related to a high degree to a decline in the equity and precious metals markets. The equation here is too complex and not solvable by narratives, including fundamentals. Investors may have to rely on simpler methods, such as momentum, and hope that the Sharpe ratio will be high enough to justify not going fully to cash. At the edges of uncertainty, cash may be the best portfolio hedge. 

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Disclaimer: No part of the analysis in this blog constitutes a trade recommendation. The past performance of any trading system or methodology is not necessarily indicative of future results. Please review the full disclaimer here.

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Fixed Income Disaster: Will Investors Ever Forget? was originally published on Price Action Lab