17 Jun Market Risk Report as of June 17, 2019
From Chief Investment Officer Tom Veale,
“Improvement in half the components was offset again this week with slight rises in risk values for two others. The result is the Market Risk Indicator (MRI) is steady this week at 27% suggested cash for diversified equity portfolios. The MRI Oscillator is again minus 1 indicating only slight downward pressure on risk.”
“Our Divergence Index remains bearish but slightly improved after last week’s trading is studied. We also noted for the first time in weeks that advancing stocks outnumbered decliners when views on a weekly basis. This might suggest we’re seeing a bit more consensus in investors’ minds as to the near future of the markets.
Again this week both our Relative Valuation Index and Speculation Index are below their median values suggesting markets are not at all overheated. Our IPO Activity Index shows that new issues are just keeping up with ones being retired.”
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.