13 Jan Market Risk Report as of January 13, 2020
From Chief Investment Officer Tom Veale,
“Our Divergence Index is just a small amount away from being bullish indicating a high level of consensus among investors. This short term indicator hardly moved with the international news last week. Consensus is working an opposing hand to SignalPoint’s Speculation Index which is now the closest it’s been to a bearish signal in two years. Overall, SignalPoint’s Market Risk Indicator (MRI) remains unchanged this week at 26% suggested cash for diversified stock portfolios. The MRI Oscillator remains at +3 showing just mild upward risk pressure.”
“The relatively steady and neutral risk profile shown by SignalPoint’s MRI bodes well for the short term. With presidential election fever starting to be felt 2020 may prove to be a bit more volatile than the previous year. Volatility in stock prices can feel risky if no plan is in place for being proactive with share price changes. However, when combined with the right plan in a neutral risk market, volatility can offer opportunity for modest profit capture.”
The Market Risk Indicator is an assessment tool that serves as a guide through all markets as to the prudent use of a liquid cash cushion. It helps determine an approximation of the amount of cash reserve relative to a diversified equity portfolio. (this is depicted by the graph above)
At times of high risk in the market, the MRI will suggest a higher level of cash reserve. At times of low market risk, the MRI will suggest a lower level of cash reserve. This investment process helps to measure and manage market risk.
Because of this, the fear associated with the uncertainty of the market can be replaced by the security of a sound investment strategy.