Broker Check

2018 | April Risk Odometer

Equity Market Risk Odometer*

 

Despite the volatility the markets have recently experienced, our Risk Odometer again remained stable in bullish territory at +4, unchanged from the previous month. The Big Three (Economic Indicators, Earnings, Technical Price Action) continue to remain positive.

Why are we still bullish amidst all the recent market and political turmoil???

Because we ignore the scary headlines and follow objective data. We believe this is a better way to maximize your wealth. Economic Indicators and Earnings have not been affected by recent volatility. Global economies are still growing and the trend in earnings is still positive. Many analysts actually expect earnings to continue to increase as recent tax cuts make their way through the economy. Some of our more market driven indicators (Technicals and Breadth) have taken a hit but are still positive.

All-in-all, we are still positive on the markets given the underlying strength of economic growth and earnings. We do not always attest to holding steady. Sometimes changes need to be made to protect our capital and satisfy our fears. It will come eventually. We just do not believe that time is now.

We understand investing can be scary and emotional. Emotions are our enemies in investing. We are all human and we cannot escape them. To combat this, we prefer to use objective data to guide us through emotional times. We advise our clients to do the same.

It is important to understand that our Risk Odometer is not designed to anticipate small to medium corrections, typically those in the 5-15% range. Instead, it monitors for conditions which have typically preceded larger corrections. We believe trying to anticipate small to medium corrections sounds attractive but more often results in lost opportunity than savings.

 

Disclosures
This information does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may view this information. Statements, opinions and forecasts made represent a particular observation and assessment of the market environment at a specific point in time and are not intended to be a forecast of future events or a guarantee of future results. Statements regarding future prospects may not be realized and may differ materially from actual events or results. Past performance is not indicative of future performance.

Each investment type has different investment risk characteristics. Risk is the variability of investment returns.
An investment in a money market fund is not insured or guaranteed and seeks to preserve the value of your investment at $1.00 per share. It is possible to lose money by investing in a money market fund.
U.S. Treasury bonds are guaranteed as to the timely payment of principal and interest.
TIPS offer a lower current return to compensate for the inflation protection. TIPS are tax inefficient and should belong in tax-deferred accounts.
Tax-exempt municipal bonds offer the opportunity to maximize your after-tax return consistent with the amount of risk you're willing to accept. Municipal bonds offer a higher net yield to investors in higher tax brackets. Municipal bonds may be subject to AMT.
Corporate bonds are considered higher risk than government bonds. Corporate bonds have higher interest rates than government bonds. The higher a company's perceived credit quality, the easier it becomes to issue debt. High yield bonds experience higher volatility and increased credit risk when compared to other fixed income investments.
Bonds have fixed principal value and yield if held to maturity. Prices of fixed-income securities may fluctuate due to interest rate changes. Investors may lose money if bonds are sold before maturity.
REITs do not necessarily increase and decrease in value along with the broader market. However, they pay yields in the form of dividends no matter how the shares perform based on different criteria than stocks.
Stocks can have fluctuating principal and returns based on changing market conditions. The prices of small company stocks generally are more volatile than those of large company stocks. Growth stocks are more volatile than value stocks.
International investing involves special risks not found in domestic investing, including increased political, social and economic instability. Investing in emerging markets can be riskier than investing in well-established foreign markets.
The price of physical materials is subject to supply and demand.
It is not possible to invest directly in any index. The performance of an unmanaged index is not indicative of the performance of any particular investment. The performance of an index assumes no transaction costs, taxes, management fees or other expenses. Past performance does not guarantee future results.
Sector investing that concentrate its investments in one region or industry may carry greater risk than more broadly diversified investments.
There is no assurance that by assuming more risk, you are guaranteed to achieve better results.
Historical performance relative to risk and return points to, but does not guarantee, the same relationship for future performance.
Diversification through an asset allocation plan is a useful technique that can reduce overall portfolio risk and volatility. Diversification neither ensures against a profit nor protects against a loss. Diversification offers returns which are not directly related over time and is intended for the structure of a whole portfolio to reduce the risk inherent in a particular security.
Data Source: YCharts

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Michael Fickell is an investment advisor representative of FC Wealth Solutions

Securities and investment advisory services offered through FC Wealth Solutions, a registered investment advisor.

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