Market Risk Report as of December 27, 2023

From Chief Investment Officer Tom Veale,

‘Tis the Season for Prognostication – Everywhere we turn we hear economists tuning up for what 2024 will bring for investors. So, feeling somewhat compelled to join in the chorus I’ll do my best to be pitch perfect.

2023 started with our Market Risk Indicator at 32 and it ended the year at 29 (this week). So, risk is slightly diminished now after 12 months. However, it’s not been a smooth change as seen in the histogram.

The late October stock lows brought the MRI down to the lowest level seen in 2023 and the rest of the last three years. From that low point we’ve enjoyed a reasonably steady recovery and continued rise in the stock indexes. Only one week (03/17/2023) of the last 52 weeks was the MRI in its cautionary territory. The rest of the year was spent with it comfortably in the ‘neutral’ area each side of its median value. This week sees the MRI rising a point again to 29 and shows continuing upward risk pressure with the MRI Oscillator showing +6. Excessive stock valuations in relation to the current short term interest rate is again showing stocks richly valued. Value Line’s average dividend is currently 2.2%/yr compared to the 13 Week Treasury coupon rate of 5.42%/yr, That headwind will be troubling in the New Year.

What can we learn from the last year? That headlines sometimes exaggerate potential concerns about the stock market. A year ago inflation was still a major concern and was followed on by worries about recession or stagnation of the economy.

True, those were yet to be completely resolved but there appears now to be some glimmer of hope that the world won’t end any time soon. The FED and the Treasury still have to figure out how to resolve the troubling inverted yield curve after 2 1/3 decades of severe interest rate manipulation. Finding where rates should be from a market driven perspective is still to be discovered.

Global conflicts are heightened from a year ago and appear to be more orchestrated than previously. How this will influence the stock markets going forward is harder to predict.

In general, 2023 was a year of sorting out and while most business sectors rose during the year some rose significantly better than others. We think this may continue during the coming 12 months with a different mix of sectors taking the lead. The SignalPoint Process reacts to such moves by taking some profits in those sectors most richly gaining while recycling reserves of cash in those areas that are out of favor. This methodology has been a constant since SignalPoint’s founding in 2008. It has provided guidance through many forms of market stress and continues to offer good counsel. We anticipate 2024 will offer about average returns for the major indexes.

Best regards,

Tom Veale

The MRI is up a point to 29 this week with the MRI Oscillator still showing upward risk pressure at +6. Only the Relative Valuation Index component is currently cautious.

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