Market Risk Report as of September 16, 2019

From Chief Investment Officer Tom Veale,
“The last two weeks have shown improvement in the MRI’s Divergence Index as it descended to a now neutral position. The result is to have the overall Market Risk Indicator drop two points this week to 24% suggested cash being held in reserve for diversified equity accounts. The MRI Oscillator sits at minus 1 showing only modest downward risk pressure.”

“As the level of investor sentiment shifted to a more positive attitude we see the Relative Valuation and Speculation Indexes rise from near bullish levels back toward their long term median levels. The trade-off of rising markets and less divergent investor attitude still favored a lower overall MRI rank for this week.

Along with the improved market activity we’ve seen the defensive areas start to give back some of their premiums. Utility stock have dropped a bit along with prices of bond funds and even precious metals. Where there were eight precious metals stocks in Value Line’s “Best Performers” list a week ago, there are now just four. ”

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.




Share Article: