Market Risk Report as of September 30, 2019

From Chief Investment Officer Tom Veale,
“Congress, thinking only of the well being of the country – not their own political careers, has decided to move ahead with impeachment inquiry of the sitting President. I’m sure the work will all be done pro bono, costing the taxpayers nothing. In the meantime it does seem to have affected the stock market.

The Divergence Index which had been most troubling through August had finally dropped back into its neutral territory two weeks ago. It was pushed higher by worried investors as last week’s trading closed. The other three Market Risk Indicator (MRI) components dropped in risk profile. The result has the MRI unchanged this week at 24% suggested cash for diversified stock portfolios. The MRI Oscillator moved to +3 indicating rising risk pressure.”

“Overall this left the MRI solidly in the middle of its own neutral range and slightly below its median value since 1982 (median = 26%). It remains to be seen if the media can keep investors’ attention on impeachment to the exclusion of economics.”

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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