Market Risk Report as of April 18, 2022

From Chief Investment Officer Tom Veale,

Markets had another soft week last week. Sometimes this happens on short weeks with 3 day weekends. Short term traders like the safety of cash during holidays and will get liquid beforehand. That appears to be the tale of last week’s ticker.

(data courtesy of Franklin Templeton Group)

The effect has been to continue to erode the 1 year total returns on the major indexes. Here’s how the Market Risk Indicator (MRI) is viewing the current situation.
Note this week’s graphic looks slightly different at the right end. I discovered an error in recording the Consumer Price Index value going back 4 weeks. Correcting this lowered the Relative Valuation component’s number and therefore the overall MRI position.
Overall, we see the S&P 500 still in its flattened state around 7+ months. Last year our IPO/New Issues Activity Index had given indication we should expect markets to trade horizontally for 12 to 18 months. This was caused by the massive number of new publicly traded stocks coming to the market. That MRI component has finally fallen back into its own neutral range.
Income components of those strategies designed for dividend yield continue to offer new opportunities for recycling some of the cash reserves held. Long dated bond funds again triggered some accumulation last week as share prices declined and effective yields improved.
Best regards,
Tom Veale
The MRI comes in at 37 this week. The MRI Oscillator shows a +2 suggesting slight upward risk pressure. All four MRI components dropped in their own risk ranges with last week’s trading. Only our Relative Valuation Index remains above neutral in its risk range.

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