11 Nov Market Risk Report as of November 11, 2019
From Chief Investment Officer Tom Veale,
“The SignalPoint Market Risk Indicator (MRI) moved upward by one point this week to 25%. The MRI Oscillator shows +5 indicating building upward risk pressure. Maybe it’s all the talk of the bull market being “too old” to continue moving higher.”
“A look at the MRI Components may help to explain where market risk is relative to history. All four MRI components are currently neutral with all but the Divergence Index sitting in the middle of their own neutral ranges. Even the Divergence Index is only modestly above its Median value while the rest are at or below their medians. Given this, we think the bears are wrong right now. Valuations are okay, IPOs seem to have slowed to a modest pace and even if Speculation is rising a bit, it still has a long way to go to be bearish. Maybe a bit of consolidation along the way will be needed.”
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.