From Chief Investment Officer Tom Veale,
“It’s always nice to see the Market Risk Indicator’s various components falling in their own risk assessment. This week three dropped while one rose. However, those that dropped didn’t do enough to budge the MRI to a lower risk threshold. It, instead, flattened out for the third week.
Last week’s trading rendered a mixed bag of results. The major cap weighted indexes rose slightly while ex-US indexes were flat, Emerging Markets dropped and the smaller cap domestics were off. Our Speculation Index remains neutrally ranked with reasonable balance between the best and worst performing stocks. When last week’s data was in, declining stocks outnumbered advancing ones and new 52 Week Lows rose to its highest level in 8 weeks. That pushed our Divergence Index upward to slightly above its median value (and neutrally ranked).
Earnings for the latest Quarter will start to tell us if valuations have improved faster than prices have risen. It appears consumer demand is currently ahead of manufacturers’ capacity in some areas of business as supply constraints held back production. Model Year change-over for the automotive sector is apparent by observation of low inventory at dealers right now.
In SignalPoint’s various strategies we’ve been able to capture some of 2021’s generous stock gains and reduce exposure. Last week’s confused trading saw rapid cash flow toward the Income side of the market with medium and long dated bond funds rising. The 10 Year Treasury Coupon rate of 1.625%/Yr remains unchanged while those existing bonds were bid upward dropping effective yield to just 1.36%/Yr. The 13 and 26 week Treasury Coupon rates are flat at 0.051%/Yr currently. Finally, the REIT market has staged a strong recovery in recent weeks bringing REIT ETFs back to and in some cases eclipsing previous highs.
Our MRI clocks in at 38, unchanged with the MRI Oscillator also unchanged at +2 (slight upward risk pressure). Two components remain in their higher risk territory while two reside neutrally.”