From Chief Investment Officer Tom Veale,
This week we have SignalPoint’s Speculation Index back in its Proactive territory for the first time since the last Quarter of 2022. Cash has been flowing away from stock markets into more conservatively designed areas as can be seen since the early 2023 rally.
Lower speculation along with slightly improved Price to Earnings helped to bring SignalPoint’s Market Risk Indicator down slightly this week. Of note is the average for all dividend paying stocks in the Value Line 1700 Index this week. It is now at 2.4% and has risen nicely since the start of the year. While not competitive with the 13 Week Treasury rate (5.294%/Yr) it certainly doesn’t hurt long term investors seeking total return.
We continue to see some tapering of inflation relative to short term interest rates. Long term interest rates remain stubbornly below the short end of the yield curve. Stock valuations are still on the high side complicating stock pickers’ choices. Sector performance differentiation remains the theme for the last 12 months. The Industrials, Health Care and Consumer Discretionary sectors lead while Energy, Communications, Financials and Basic Materials are currently lagging. Even so, in our U.S. Sector ETF Portfolio Strategy half remain within 10% of their next inventory reduction target prices.
This week the Market Risk Indicator dropped a point to 31 with the MRI Oscillator showing minus 3 (declining market risk pressure). Two MRI components are currently in their own lower risk territories while valuations remain troubling.