Executive Summary-- LONG RATES SLIP

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

The 30-year T-bond dipped to 5.60% and the 10-year to 5.24%. The cash yield rose to 4.06%, and the 3m-10y yield curve flattened to 119 bpts. Oversold, US long Treasury prices rose 1.1%, as expectations of at least one (and possibly two) additional 2026 Fed rate hikes waned ever so slightly. Lower US yields did not dampen the Dollar (+0.4%) but they did boost commodities (+1.3%), including oil (+0.6%) and gold (+1.2%). US large-caps (+1.2%) enjoyed the break in rising yields, but US small-caps (-0.9%) were not convinced. Offshore equities were mixed to down against the stronger Dollar. Only Latin America (+9.1%) was up, and that was an anomaly. Europe (-0.4%), Japan (-1.1%), and Asia Pacific (-2.3%) were all down. One change in the models this week.

GLOBAL OUTLOOK POSITIVE (4 of 4 and unchanged this week) — The Baltic Dry Index, oil and copper prices and bond yields are all higher, making the outlook very positive.

US INFLATION: No data releases. WTI oil prices up a few cents to $92. Global inflation per the Fed Check (84) still warrants tightening despite the latest rate hike but seems to be cooling.

US ECONOMY: Jobless Claims Low, Services Expansion Slows, Consumer Sentiment Weakens. Yield curve positive and steepening. Recession chances a year out shrinking and minimal. Money market system healthy per SOFR. Above average US growth prospects. GDP Now estimate (Q3) at 3.6% as of 10/09.

FEDERAL RESERVE: 1st rate hike since 12/25 rate cut three weeks ago. Fed Check (84) remains hawkish. The Fed's balance sheet currently stands at $6.75 trillion, with the Fed Funds Rate at 3.75-4.00%. By December, at least one more Fed rate HIKE (81%) is likely and possibly two.

INVESTMENT STRATEGIES: There is one model switch this week.

INDEX MODEL: SWITCH to US Large-caps (SPY) 10/9/2026

1st MIXED-Risk week after 1 Risk-OFF week.                                                                                               US Stocks MIXED, Foreign Stocks MIXED, Bonds UP and Gold UP.

THIS WEEK: #1 US large-caps (SPY) continue to lead in overall confidence, technical strength, and a bullish RSI. This week (10/5), SPY triggered a buy-stop and its PMO, which governs switches became “positive and improving” allowing SPY to finally replace EEM in the Global Model. The switch means all three of our models are now invested in US Large-caps. Best Alternative: EEM is still a viable alternative to SPY, but to switch back its PMO needs to be positive and improving and greater than SPY’s. Both ETFs are rangebound and flat, essentially “correcting in place”. Chances of a big move in either appear muted. Average directional change (ADX) is weak (near 10 for both with 25 normal). Short US income (SGOV) is the fallback if PMO for both SPY and EEM goes negative.

Best Alternative: EEM is still a viable alternative to SPY, but to switch back its PMO needs to be positive and improving and greater than SPY’s. Both ETFs are rangebound and flat, essentially “correcting in place”. Chances of a big move in either appear muted. Average directional change (ADX) is weak (near 10 for both with 25 normal). Short US income (SGOV) is the fallback if PMO for both SPY and EEM goes negative.

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.