Broker Check

2024 | April Risk Odometer

For the third consecutive month, our Risk Odometer score remains deeply in positive territory at +3 and our Current Outlook remains at its highest level of “Positive”.  All of the individual indicators remained unchanged from the previous month.

We continue to grow more optimistic on the economy which we believe should support the markets going forward.  The only negative indicator we have is Economic Indicators, which seems counterintuitive, but we are witnessing that risk factor waning.  With all the other indicators in positive territory, it gives us comfort in ignoring that risk for now and being optimistic on the markets.

The stock market continues to trade very well this year despite the recent rise in interest rates.  The Fed is not expected to lower rates as aggressively as many expected earlier this year but that has not stopped the stock market from going higher.  The trend of higher stock prices is a force that appears to be in full force and is not something we advise clients to fight.  The trend is your friend.

While not part of our Risk Odometer, the US presidential election remains an upcoming event that could cause market volatility.  We are not concerned about the event at this time because we do not believe that either outcome will necessarily be a concern for the markets.  More of a concern for us would be a slowing economy, but this does not appear to be the case currently as the economy is currently accelerating. Valuations are a concern, but we counter that concern with broadening of our stock exposures to outside of the Magnificent 7 stocks which we believe offer good value.

As always, we continue to believe our Risk Odometer provides guidance in making better investment decisions because it keeps us objective and disciplined.  We use this methodology and advise ouscr clients to do the same.  Emotions are our enemies in investing. 

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.

The Equity Market Risk Odometer is our guide for judging risk in the equity market.  It is used as a guide for investment decisions in our proprietary investment strategies.  It is composed of various indicators based on leading economic indicators, earnings, technical price action, breadth, and volatility.  Its score can range from +5 to -5.  Readings greater than one are positive and readings less than or equal to zero are negative.