Market Risk Report as of September 7, 2020

From Chief Investment Officer Tom Veale,
“The risk that has been building for nearly two months seems to have hit an upside threshold and is now at a plateau. The SignalPoint Market Risk Indicator is again at 36 for the third week. The MRI Oscillator has dropped to zero so no further upward pressure is indicated.”

“A bearish signal from the MRI historically hasn’t been a signal that markets are going to collapse but rather the normal upward trend of the markets will stall. Another way of saying it is that upside potential is less than average and downside risk is greater than average.

Only our Relative Valuation Index is currently bearish as our Speculation Index dropped below its bearish threshold. The heightened Price/Earnings ratio displayed by Value Line’s 1700 stocks leaves little room for stock price appreciation without corresponding improvement in earnings. The more esoteric form of speculation, IPO Activity, has been rising in the last month and is diverting normal investment money away from the traditional index stocks. This also has the effect of capping stock index upward travel. We continue to watch the pulse of the markets carefully.”


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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