THIS WEEK: 1st Risk-OFF week after 2 MIXED-Risk.                                                          US Stocks DOWN, Foreign Stocks MIXED, Bonds UP and Gold DOWN

EXECUTIVE SUMMARY-- Midterm Massacre

US equities had been skittish for a while, going into this week’s mid-term elections, but the actual damage had been minimal. That only lasted until the votes were counted this week and the full implications of the result hit home. By Thursday the wheels had come off US large-caps (-2.7%) and small caps (-2.0%). A stellar jobs report on Friday helped the Dollar (+0.4%) and stemmed the ebb-tide, but US equity investors continue to exit the mega-cap high-flyers for small and midcap names, as Value, High Dividend, Low Volatility and Equal Value replace Momentum and Growth strategies. Offshore, stocks were mixed but generally lower. Japan (-5.0%) and Asia-Pacific ex-Japan (-3.6%) took large hits—less so Europe (-0.2%) and Latin America (+0.0%). US Long T-bonds (+0.7%) provided some refuge from equities along with gold (+4.7%) which benefitted from lower interest rates. The 10-yr yield dropped to 4.86%, as the cash yield edged up to 4.00%, flattening the 3m-10y yield curve to 86 basis points. Commodities (-6.2%) followed the oil complex (-12.1%) lower as WTI crude prices slipped to $91 and Brent crude to $98. Two models switched this week after a third stop-loss hit SPY.

GLOBAL OUTLOOK NEGATIVE (1 of 4, DOWN this week). The Baltic Dry Index is down on the quarter, along with copper prices and 10Y Treasury yields. Only oil prices are up on the quarter.

US INFLATION: No data releases. WTI oil prices fell from $104 to $91 and Brent from $118 to $98. Global inflation per the Fed Check (87) still warrants tightening but less so than last week.

US ECONOMY: Global & US Activity Expanding, US Jobs Strong, Consumer Sentiment Optimistic. Yield curve positive and flattening this week. Recession chances a year out shrinking and minimal. Money market system healthy per SOFR. Above average US growth prospects. GDP Now estimate (Q4) at 3.4% as of 11/04.

FEDERAL RESERVE: No policy change at last meeting. One rate hike in 2026 seven weeks ago. Fed Check (87) remains hawkish. The Fed's balance sheet currently stands at $6.75 trillion, with the Fed Funds Rate at 3.75-4.00%. At least one more Fed rate HIKE (76%) is likely by December.

INVESTMENT STRATEGIES: There are two model switches this week

INDEX MODEL: SWITCH to Cash (MMF) via SPY stop-loss 11/02/2026

THIS WEEK: 1st Risk-OFF week after 2 MIXED-Risk. US Stocks DOWN, Foreign Stocks MIXED, Bonds UP and Gold DOWN

TOP GLOBAL INDEX CHOICE: The top asset per CI is still US Large-caps (SPY). It gives way to Cash this week however, as technical strength is no longer bullish (<60) PMO is negative (<0) and deteriorating. RSI is bearish (<50) and SPY triggered a third 20-day low (stop-loss) on 11/2/2026 @732.10.

BEST ALTERNATIVE: The only other choice with a positive CI and PMO, and a TS>50 is SGOV (cash). Long bonds have made a run the past three weeks off an oversold bottom and PMO is positive and improving, but CI and TS suggest it is a bit early. Cash is the top choice for now.

Strong gold kept the Index model in bullion to start 2026, with GLD outperforming all equity asset classes through the first quarter. The model rotated into EEM in late Q1 as emerging market momentum accelerated and gold's relative strength began to fade. After the rotation, EEM added meaningfully to the year-to-date advance until US rate hikes strengthened the Dollar and SPY.

THE GLOBAL INDEX MODEL has been around for 34-years in one iteration or another. It is a momentum-based market timing model the latest version of which compares the relative strength of ETFs representing US stocks (SPY, IWM) and international stocks (EFA, EEM) along with US Treasuries (SHY, EDV) and Gold (GLD) in order to pick the single best asset class in which to invest your money. The model is updated weekly and the current recommendation is published each weekend in the Decision Moose newsletter.