2025 | November Risk Odometer

The Risk Odometer remained at +3 and our Outlook at his highest level of “Positive” for the fifth consecutive month this year. 

Our consistently positive Risk Odometer has been confirming recent strength in the stock market.  Following the Liberation Day tariff sell-off in April, the markets have experienced a steady climb higher with very little volatility, fueled by stable economic growth and healthy double digits earnings growth.  The labor market has softened recently but the Fed has recently lowered rates to stimulate it.  Even the longest government shutdown in our nation’s history has not stopped the markets.

AI continues to be a dominant theme propelling the markets higher.  Recent Q3 earnings reports have come in strong, especially from those at the epicenter of the AI theme.  So long as their earnings continue to grow double digits, we believe they will continue the massive infrastructure spending they have forecasted.  This massive spending creates a vote of confidence for investors.  Until the spending changes, we believe it will be difficult for stock market corrections to be viewed as anything other than opportunities.

The market is never absent outstanding risks.  The labor market is slowing, but the Fed is lowering rates to counter its effects.  Inflation remains sticky and above target, but the Fed is more focused on labor and discounting it for now.  Valuations are becoming extreme, but valuations are a terrible market timing tool.  Our biggest concern is concentration risk which could have systematic effects if optimism around AI fades.

We do not see that occurring, but it remains on our radar.  Nevertheless, these risks pale into comparison to resilient economic growth, strong company earnings, stock market momentum, and a positive Risk Odometer.  We remain bullish.

As long-time market participants, we know it will not go straight up forever.  Corrections along the way are inevitable and should be expected.  This time is no different despite how optimistic we are.  It has always been a low probability event to call a market top.  There will always be pundits out there who do.  It makes for better stories and getting noticed can often be their objective.  Helping you grow your wealth rarely is. 

Understanding this low probability, our Risk Odometer is not designed to call market tops.  It is designed to detect economic inflection points, which often occur after markets have fallen at least 10% or more.  We believe investors in the stock market should not invest if they are not willing to witness the stock market drop at least 20%. 

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 our 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.

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_{This information does not have regard to the specific investment objectives, financial situation and the 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.}

_{FC Wealth Solutions and its representatives do not provide legal or tax advice.  You may want to consult a legal or tax advisor regarding any legal or tax information as it relates to your personal circumstances.}

_{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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