Market Risk Report as of June 6, 2022

From Chief Investment Officer Tom Veale,

My job would be so much easier if Markets behaved more like clockworks than accumulation of random events. Certainly the concept of Reversion to the Mean is known and understood by market participants but why then do markets drift so far from Mean time and again? It’s been the SignalPoint Market Risk Indicator’s job to watch over various aspects of investing behavior and give us a summary of the drift.

The small bounce we’ve seen in the last couple of weeks may not have defined the market’s “bottom” but we do see the MRI flattening out a bit. While the MRI had been moving toward its median value our Relative Valuation Index never relaxed enough to allow that to occur. The rise of both Inflation and Short Term Interest Rates continues to put risk pressure on the average Price/Earnings ratio of the broad market. Generally we can’s see those two measures rise without P/Es declining. Declines in P/E can come from improved earnings or price declines. Declines seen since the early part of 2022 have helped but the move is still not enough to shift risk pressure downward.
 
Best wishes,
Tom Veale

The MRI remains flat at 30 again this week even as three of the components rose in their own risk ranges. Three are neutral and just Relative Valuation remains in its own bearish territory. The MRI Oscillator comes in at +3 indicating slight upward risk pressure on the markets.

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