Market Risk Report as of January 23, 2023

Man looking at directional arrows on notebook paper

From Chief Investment Officer Tom Veale,

As we watch the January markets we hear a lot of confusing discussion in the financial news. A haiku came to me:

Blabity, Blab, Blab

Inflation! Recession! Ugh!

Just get back to Work…

This week we have two of the Market Risk Indicator components rising in risk profile while two declined. Those kept things steady. The Relative Valuation Index remains more than a full standard deviation away from its median point and is still limiting upside market potential. The Speculation Index is still just above its median value but is rising with stock price recovery. It takes nearly a 51% rise in stock price to make Value Line’s “Best Performers, latest 13 Weeks” list right now. By contrast, it only takes a 21% drop to be on their “Worst” list. The Divergence Index shows traders are aligned on the bullish recovery side of the Street. The IPO/New Issues Index shows the number of issues available to investors is actually contracting.

Overall, the MRI suggests we’re in a period with only modestly higher risk than the median since 1982. Earnings reports over the next few weeks may help to clear the view forward.
Meanwhile, our Portfolio Strategies continue to track the markets closely. Both domestically and globally stock markets have improved from the close of 2022.
Best regards,
Tom Veale
This week’s MRI comes in unchanged at 30 with the MRI Oscillator at +4 (indicating upward risk pressure).

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