Market Risk Report as of January 20, 2020

From Chief Investment Officer Tom Veale,
“This week a drop in our Speculation Index is offset by the other three Market Risk Indicator (MRI) components rising. All components remain neutral as does the overall MRI at 26% suggested cash for diversified stock accounts, unchanged in 6 weeks. The MRI Oscillator remains at +3 suggesting mild upward risk pressure.”

“Interest rates have remained nearly unchanged. This has allowed our Relative Valuation Index to remain neutral as the Price/Earnings ratio of Value Line’s 1700 Stock universe has been rising. P/E and/or the 13 Week Treasury Coupon Rate could rise over one full point and this component would remain neutral. There are exceptions with individual stocks, but the market remains healthy overall.”

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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