From Chief Investment Officer Tom Veale,
Like a kid in a life jacket, the markets were dunked and then resurfaced quickly last week. Were there reasons for this? Probably, but what is interesting is what is the effect for serious long term investors. Our Market Risk Indicator (MRI) was stubbornly giving cautious signals for the better part of two years. That’s a long time in the face of rising indexes. Now, as indexes have been in decline, did we see the odd market behavior as being correct or the MRI?
The MRI dropped to 28 this week and the MRI Oscillator moved to negative 5. The low Oscillator value suggests market risk is retreating quickly here. At 28, the MRI is just 2 points above its Median value. After tedious months of very high average stock valuations we seen the MRI’s Relative Valuation Index drop back to its neutral range. This doesn’t suggest “bargains” but at least “fair value.”