Market Risk Report as of August 31, 2020

From Chief Investment Officer Tom Veale,
“August, 2020 is ending with the SignalPoint Market Risk Indicator still in bearish territory, unchanged at 36. The MRI Oscillator is now a modest +2 indicating slight upward risk pressure. This is the 6th week of the MRI being in risky terrain.”

“Two components (Relative Valuation and Speculation) remain in their own bearish areas while two more remain neutral. This last week we saw the result of another form of speculation surface. Our IPO Activity Index is closing in on its own bearish threshold as it reaches a high point not seen since late August of 2018. Increases in the number of issues available for investors has a dilutive effect shifting investment capital from traditional stocks to IPOs.”

“Such activity may help to explain the small and mid cap portions of the market being left somewhat behind in the post C-19 rally.”

 

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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