Market Risk Report as of January 9, 2023

Tom Veale
January 9, 2023

From Chief Investment Officer Tom Veale,

Well, the first week of the New Year wasn’t conclusive on where we’ll end 2023. It was not a complete change of personality from 2022 but seemed to be a bit more selective. There were about 1/3 more New 52 Week Highs than Lows for last week’s trading. Of interest in looking back at 2022 is how much variance there was from one business sector to another. This graphic shows several things: 1) room for reversion to Mean, 2) impact of weights per sector in the S&P 500 and 3) why managing the S&P500’s Sectors can potentially be more profitable than just owning the SP500 Index fund.

Whether markets are going up or down there may be some sectors out-performing others and the overall market. There can be room for opportunistic trading on both the buy and sell sides with the sectors but hidden from view in the SPY Index Fund.

Our sentiment indicator, the Divergence Index, improved with last week’s trading. It helped to remove some market risk this week.

Three of the four Market Risk Indicator components declined in risk posture this last week. One remains above its neutral range and one below. As earnings reports start to flow from companies we’ll see what effect that has on overall stock market valuations. The 13 Week Treasury Coupon Rate climbed to 4.522%/Yr at the week’s close. The Consumer Price Index remained steady giving the impression that rate hikes are slowing the upward inflation trend. Market speculation, as we measure it, is neutral right now.

We expect as 2023 moves onward to see different sector deviation occur. Our portfolio designs offer opportunities across both sectors and market capitalizations. We will be tracking these and participating when the opportunities become apparent.

Best regards,
Tom Veale

The MRI dropped another point this week to 31 as market risk declines. The MRI Oscillator is +1 indicating very little upward pressure on market risk. Our Relative Valuation Index is still a bit high for comfort but our IPO/New Issues Index is well below its neutral range.

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