Weekly Risk Report 07/13/2009
The consolidation has been working now for several weeks. The market risk spiked with the speculative rush to put money back into the markets between March and June and now has fallen back to more moderate levels. It is quite rare that we see a single component push the weighted sum into a “high risk” condition, but that is exactly what happened this time.
Currently two of the four components are neutral and two remain bullish. Relative Valuation remains bullish, but it appears the markets are pricing stocks as though short term interest rates were nearer 5% than the very low 0.2% for the 13 week Treasury. Since the markets tend to anticipate, this might be a sign of where interest rates will go should inflationary pressures start to rise. Even a “reversion to mean” would push up short term rates measurably.
The consolidation period has left our portfolios in good shape so far. While there hasn’t been much in the way of trade activity or capital appreciation, the dividend distributions continue.
We continue to carefully monitor all the various components for changes in their status.
