Market Risk Report as of January 27, 2020

From Chief Investment Officer Tom Veale,
“The modest upward risk pressure we’ve seen since the start of the year finally pushed the SignalPoint Market Risk Indicator up a point this week to 27%. That level of cash being held in reserve for diversified stock accounts should be adequate for the current risk conditions. The MRI Oscillator remains at +3 showing continued mild upward risk pressure.”

“Four components show opposing equals with two up and two down again this week. All remain neutral as is the overall MRI at just one point above the median value since 1982. The Relative Valuation and Divergence Indexes rose while the other two declined. We also saw the first change for the year in the market breadth this last week with advancing stocks overwhelmed by decliners with nearly two decliners for each advancing stock. It may mean a well-deserved consolidation is at hand. With a new quarterly earnings reporting period upon us there may be some Wait and See going on as well.”

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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