From Chief Investment Officer Tom Veale,
“All that “new record highs” news along with renewed uncertainty with U.S. Interest Rates and ongoing Trump/Xi trade discussions has brought investor confusion (MRI Divergence Index) back up to bearish levels. The other MRI components are neutral, however. This has forced our MRI value up 1 point to 25% suggested cash for diversified stock accounts. The MRI Oscillator is +3 indicating renewed upward risk pressure.”
“Market Breadth also showed signs of investor confusion with last week’s declining issues outnumbering advancing ones. This all came with around a 1% decline in major indexes.”
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.