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2019 | December Risk Odometer

FCWS View December 2019 | Outlook: Positive
Tuesday, 03 December 2019

2019 |  December Risk Odometer

Screen Shot 2019 12 03 at 10559 PMThis month, we are introducing a new format to our Risk Odometer. Our Current Outlook Table to the right of the odometer now shows 4 categories: Positive, Cautiously Positive, Use Caution and Defensive. Our current stance will be highlighted while the other levels will be grayed out. This change was designed to show where we currently stand relative to the different possible outlooks.

For the second consecutive month, our Current Outlook remains “Positive”. Our net Risk Odometer score moved down one notch from +5 to +4 this month. The small change in the net score is merely noise.  

2019 | November Risk Odometer

FCWS View November 2019 | Outlook: Positive
Monday, 04 November 2019

2019 |  November Risk Odometer

For the first time since May, we are changing our Current Outlook from “Cautiously Positive” to “Positive”. This upgrade is the result of improvements in Technical Price Action, notably from improvements in international markets. Global equity markets appear to be rising in sync with domestic equity markets, an important development in how the Risk Odometer views risk.

2019 | October Risk Odometer

FCWS View October 2019 | Outlook: Cautiously Positive
Thursday, 03 October 2019

2019 |  October Risk Odometer

 cautiously positiveFor the fifth consecutive month, our Outlook and Risk Odometer reading remained unchanged at “Cautiously Positive” and +4.  While on the surface nothing has changed again, under the hood it has. Many of the indicators are deteriorating, meaning things could change quickly.  We began to witness the deterioration last month, and the deterioration has furthered into October. For this reason, we remain particularly sensitive to near-term developments.

2019 | September Risk Odometer

FCWS View September 2019 | Outlook: Cautiously Positive
Tuesday, 03 September 2019

2019 |  September Risk Odometer

 cautiously positiveOnce again, our Outlook and Risk Odometer reading remained unchanged for August at “Cautiously Positive” and +4. While on the surface nothing has changed, under the hood it has. The overall score remains unchanged, but many indicators are deteriorating, meaning things could change quickly.

2019 | August Risk Odometer

FCWS View August 2019 | Outlook: Cautiously Positive
Thursday, 01 August 2019

2019 | August Risk Odometer
Current Outlook

Cautiously Positive

Our Outlook and Risk Odometer reading remained unchanged for August at “Cautiously Positive” and +4.  Very little has changed in our indicators and outlook over the past 6 months. The things that are positive remain positive and the things that concern us are still there.  Overall, the positives outweigh our concerns. Our tactical investment strategies remain predominately invested in growth with a small amount in defensive allocations while we closely watch unfolding developments.

2019 | July Risk Odometer

FCWS View July 2019 | Outlook: Cautiously Positive
Monday, 08 July 2019

2019 | July Risk Odometer
Current Outlook

Cautiously Positive

Our Risk Odometer moved down one notch from +5, where it had been since March, to +4 for June. This small change in the overall score has caused us to also change our Outlook one notch lower, from “Positive” to “Cautiously Positive”. Our new outlook means we are still overall positive on the stock market, but with a small amount of caution.

2019 | June Risk Odometer

FCWS View June 2019 | Outlook: Cautiously Positive
Wednesday, 05 June 2019

2019 | June Risk Odometer
Current Outlook

Cautiously Positive

Our Risk Odometer moved down one notch from +5, where it had been since March, to +4 for June. This small change in the overall score has caused us to also change our Outlook one notch lower, from “Positive” to “Cautiously Positive”. Our new outlook means we are still overall positive on the stock market, but with a small amount of caution.

2019 | May Risk Odometer

FCWS View May 2019 | Outlook: Positive
Thursday, 02 May 2019

2019 | May Risk Odometer
Current Outlook

Positive

Our Risk Odometer and Current Outlook are both unchanged for May at +5 and a “Positive” outlook. April was the 4 th consecutive month this year for positive equity market gains and the S&P 500 eclipsed the all-time highs set in January 2017. International markets have also experienced steady gains this year yet remain below all-time highs. Overall, the equity markets continue to trade well despite many economists’ warnings of slowing global growth in 2019.

2019 | April Risk Odometer

FCWS View April 2019 | Outlook: Positive
Wednesday, 03 April 2019

2019 | April Risk Odometer
Current Outlook

Positive

Our Risk Odometer improved another several notches this month, moving from +3 in March to +5.  As a result, we are upgrading our Outlook for a third consecutive month to “Positive”. 

The warning signals our Risk Odometer gave us in December served us well, but those warning signs have largely faded.  There are still indicators near inflection points and the duration of the economic expansion continue to worry pundits, but the objective nature of the Odometer points to far greater positives than negatives.  For this reason, we have moved to a “Positive” Outlook.  We have raised our equity allocation in our flagship tactical asset allocation strategy from 60% last month to 85% in April, coinciding with these improvements.

2019 | March Risk Odometer

FCWS View March 2019 | Outlook: Cautiously Positive
Tuesday, 05 March 2019

2019 | March Risk Odometer
Current Outlook

Cautiously Positive

Our Risk Odometer has improved another notch this month from +2 to +3. As a result, we are upgrading our Outlook for a second consecutive month from “Use Caution” to “Cautiously Positive”.

Our Outlook turned to Defensive in mid-December, giving a timely warning signal to a sharp sell-off shortly afterward. 2019 has been dramatically different.   The stock market has experienced the best two-month start to a calendar year in almost 30 years! This is mainly attributable to a more dovish stance (fewer rate hikes) from the Federal Reserve and positive developments on the trade war front. Our Odometer has also picked up on these positive signals, going from 0 in December to +3 today and our Outlook continues to improve.

2019 | February Risk Odometer

FCWS View February 2019 | Outlook: Use Caution
Monday, 04 February 2019

2019 | February Risk Odometer
Current Outlook

Use Caution

We have upgraded our Outlook one notch from “Defensive” to “Use Caution”.  This is the result of the indicators we monitor improving as the markets improved throughout January.  Technical Price Action improved to neutral and Volatility turned positive causing the changes.

We view our Current Outlook as a one foot in and one foot out stance.  Our proprietary strategies reflect this stance with equal allocations to stocks and bonds.  We are at a critical stage in the markets and we do not envision our Outlook remaining here very long.  We will wait for incoming data to give us a clearer outlook.

2019 | January Risk Odometer

FCWS View January 2019 | Outlook: Defensive
Friday, 04 January 2019

2019 | January Risk Odometer
Current Outlook

Defensive

For the first time in almost 3 years, our Risk Odometer turned Defensive! This is a substantial change and does not happen often. Historically, it occurs about once every 2 years and is a leading indicator for continued volatility. We recommend investors use caution in these environments and carefully review their risk.

The timing of our downgrade occurred mid-month, providing us the opportunity to turn more defensive. We allocated away from risk assets such as equities and increased our position in Treasuries and cash. The timing of our Odometer proved valuable as December 2018 became the worst December since the Great Depression!

2018 | December Risk Odometer

FCWS View December 2018 | Outlook: Cautiously Positive
Tuesday, 04 December 2018

2018 | December Risk Odometer
Current Outlook

Cautiously Positive

Our Risk Odometer remained stable at +4 this month and the current outlook remains as “Cautiously Positive”. Despite the modestly high Odometer reading, many of the indicators sit near inflection points and could quickly turn from positive to negative. This means our outlook could easily change in the coming months.

Intra-month, the Risk Odometer had dropped to +2 but recovered to +4 by month end following a sudden market turn-around at the end of November. It is key during these inflection points to monitor incoming data and remain objective. Recently, markets have moved with unprecedented speed and velocity and this can elicit many emotional responses. In these environments it is best to divorce yourself from those emotional responses and have a plan for dealing with unavoidable aspects of the markets. Ideally, these plans are disciplined and objective. This is the objective of our Risk Odometer, to provide a disciplined and objective approach and avoid emotional responses. It will never be perfect, but it will provide a structure for removing emotions from challenging decisions.

2018 | November Risk Odometer

FCWS View November 2018 | Outlook: Cautiously Positive
Thursday, 08 November 2018

2018 | November Risk Odometer
Current Outlook

Cautiously Positive

Our Risk Odometer had its first move lower in many months, moving from 6 down to 4, causing our Outlook to change from “Positive” to “Cautiously Positive”. This is our first outlook change in several years and reflects prudent risk-mitigation steps we have taken in our proprietary strategies. Most of our indicators remain positive and we continue to have a positive outlook about the US Economy, but recent market developments have created some caution around that stance. Should the recent developments recede, we would return to a Positive outlook, and if conditions deteriorate, we would take further risk-mitigation steps and further lower the outlook. Our investment stance has always been that we do not believe in predicting the markets, rather we react to the data we know in a consistent and disciplined fashion. This stance keeps us objective and removes our emotions from the decision process. Emotions are our enemy in the challenging world of money management.

In last month’s Risk Odometer synopsis, I highlighted some of the potential risks (valuations, rising rates, trade wars) but noted they were not having a material impact on the markets. That gave way in October as equity markets experienced sharp corrections. There was no obvious reason that caused the sharp corrections. Events like this serve as a reminder that volatility should be expected and anticipated. Having a plan for dealing with inevitable fluctuations can make substantial differences to long-term returns. Our advice has always been to remain objective with consistency and discipline.

2018 | October Risk Odometer

FCWS View October 2018 | Outlook: Positive
Thursday, 11 October 2018

2018 | October Risk Odometer
Current Outlook

Positive

Our Risk Odometer remained Positive and unchanged yet again at +6 for the fourth consecutive month. The Odometer has had a Positive outlook since March 2016. The high reading continues to keep our big picture outlook positive. The foundation of the Odometer, The Big Three (Economic Indicators, Earnings and Technical Price Action), continue to confirm the positive outlook, further solidifying our stance.

 

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