Market Risk Report as of August 29, 2022

From Chief Investment Officer Tom Veale,

There can be two ways to view last Friday’s close.

1) The Dow was off more than 1000 points!

2) The Dow dropped about 3% on Friday.

While both are correct, there is greater ‘headline’ effect with #1. Neither are great news. However, Mr. Powell’s comments have long been the source for headline trading. For those with a longer investing time horizon than a single heartbeat last Friday will just become another statistic for the history books.

Last week’s consolidation did help take some pressure off the upward movement of SignalPoint’s Market Risk Indicator. Three of the four components moved downward to lower risk levels on the trading. One remained unchanged. Overall, here’s how it looks with a 3 year perspective:

Here the Friday Close doesn’t seem as dramatic. A friend called and reminded me it was around 1972 when the Dow first crossed above 1000 points and Richard Nixon had just been elected for a second term. A 1000 point drop back then would be worthy of headlines.
Interest rates from 13 weeks through 10 years remain rather flat between 2.75%/yr to 3.20%/yr. While far better for savers than a year ago these rates are still well below the historical average. Value Line’s median dividend yield for all the current payers out of their 1700 stock universe is 2.1%, so about where current treasury rates are. In a period of inflationary pressures is it better to be invested for fixed income or stock price appreciation. The time horizon makes a difference in how this can be answered.
Best regards,
Tom Veale
SignalPoint’s MRI comes in at 31 again this week, unchanged. The MRI Oscillator dropped to +4 indicating a slower rising risk rate than a week ago.

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