Market Risk Report as of October 28, 2019

From Chief Investment Officer Tom Veale,
“This week finds two Market Risk Indicator components just below their median values while two are just above. Two rose slightly while two declined. The result is that the MRI remains unchanged again this week (7th week in a row) at 24% suggested cash reserve for diversified stock accounts. The MRI Oscillator moved up one point to +2 indicating a bit more upward risk pressure on the markets.”

“All of the S&P 500 business sectors are showing positive values for the year to date with Information and Real Estate leading the way with better than 30% gains. Only two sectors are less than double digit gains for the year (Energy and Healthcare). With stocks generally performing well some of the premium of the fixed income side of the market has been trimmed. It’s too soon to tell but it appears the “sell into strength” side of the bond rally this year may have peaked.”

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.


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