From Chief Investment Officer Tom Veale,
While not yet at the Caution threshold, the MRI shows a slight upward slope the last few weeks. This has been from modest increases in Speculation, Relative Valuation and Divergence happening together. Considering how nicely the big stock indexes have been doing, it’s surprising the MRI hasn’t risen faster. The 2023 year started with a lot of gloomy predictions about the economy, inflation and international unrest. Even so, the MRI at the start of 2023 was only a bit above its Median value back then. This seemed odd at the time with all the New Year gloom.
After a bit of a bumpy start, 2023 has done well for investors. If anything, the MRI’s slight rise in recent times now seems to be only acknowledging how well the indexes have done. It has been easy scaling of the Wall of Worry so far. With the Value Line 1700 Stock Index now showing an average P/E of 18 and interest rates in excess of 5.4%/yr for the 13 Week Treasury we can see some stretch marks showing as the indexes approach the Slippery Slopes.
We are cognizant of the need to keep the Equity to Cash ratios of our various strategies moving in concert with the market’s movements and are watching for opportunities to capture profits in this favorable environment.
The MRI stays at 31 this week while the MRI Oscillator rises to +4 showing rising risk pressure. There is still very little new stock issue activity and traditional speculation is still mild. Our Divergence Index is right around its median value and neutrally positioned. Only our Relative Valuation Index remains cautious and well above its median value.