2025 | September Risk Odometer

For the 3rd month in a row, the Risk Odometer remained stable at +3.  Our outlook remains at it highest level of “Positive.” 

The Federal Reserve recently paved the road for upcoming reductions in short-term interest rates.  Despite inflation being above their target, they feel that adding support to a slowing labor market is best for the economy.  The markets loved it and have enjoyed a stable rise higher with little volatility since the news broke.  Our Risk Odometer is confirming this positive price action.  All of the indications we monitor are positive with the exception of one, Economic Indicators, which has been negative for several years.  We have largely discounted it because of all the offsetting positive indicators we monitor. 

The market rally has begun to broaden outside of only big technology firms.  It is now beginning to include small and mid-size cap stocks and cyclical stocks such as financials and industrials.  A broader rally is often considered a healthier rally because it includes a greater number of participants. 

Concentration risk remains.  The ten largest companies’ percentage of the overall stock market continues to reach all-time highs.  This risk is acceptable for now as long as their profits continue to grow at a healthy rate, which they are.  They are expected to remain healthy for the foreseeable future, so we do not view this as a near-term risk for now.

The slowing labor market remains the highest near-term risk we are monitoring.  Job creation has slowed meaningfully in the past three months, but job losses remain low.  Stated differently, companies are not hiring new employees, but they are also not firing existing ones.  If job losses increased meaningfully, it would be a greater risk.  This slowing labor market risk is also being offset by lower interest rates which is softening the economic impact and propelling the stock market higher.

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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