From Chief Investment Officer Tom Veale,
It seems as long as corporate earnings hold up, so will the markets. At least last week’s activity supports that idea. The SignalPoint Market Risk Indicator crossed the rounding threshold with last week’s data and is officially borderline “cautious” this week. Two components remained unchanged this week with one rising and one falling. The net effect was not much of a change. Further, it continues to be our Relative Valuation Index that is holding the MRI at its current level. No change in the Value Line Price to Earnings ratio and flat inflation and interest rate levels keep the Relative Valuation well above its median score.
The 13 Week Treasury Rate sits at 5.128%/yr as of Friday’s close. The 10 Year Coupon and Discount Rates remain nearly the same and below the ST Treasury by ~1.5%. It remains to be seen if Corporate America can earn its way to a better valuation level.
The MRI moved up to 33 this week, a one point rise. The MRI Oscillator shows just +1 indicating nearly no upward risk pressure. IPO activity remains very low (bullish) while valuations relative to risk free returns is still somewhat bearish.