Market Risk Report as of April 27, 2020

From Chief Investment Officer Tom Veale,
Upward risk pressure in all four Market Risk Indicator components added one point to the MRI this week, raising it to 10. This is still a very bullish signal looking out over the next year. Two components remain in their own bullish ranges while the other two are now neutral. The MRI Oscillator is +4 this week indicating the extent of the upward risk pressure. This is the 6th week of the MRI being in bullish range and it’s still ten points below the neutral range.

While the markets are still well below their January and February highs they’ve recovered nicely so far from the March low point. There is a large amount of speculation about how things will look 3, 6 and 12 months from now with many market commentators suggesting it will be 24 months until the economy is back to where it was before the c-19 outbreak. Markets tend to anticipate the economy and many analysts are predicting as much as two years until  they surpass highs made earlier this year. However long it takes to achieve such goals, money invested today looks to have good upside potential and limited downside risk.”

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.




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