For the first time in almost 3 years, our Risk Odometer turned Defensive! This is a substantial change and does not happen often.
Monday, 14 January 2019
- Risk Odometer’s outlook downgraded to defensive for the first time in 3 years
- Making sense of a very challenging investment environment in 2018
- Our outlook for 2019 and where we see opportunities
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 allocate away from risk assets such as equities and increase our position in Treasuries and cash. The timing of our Odometer proved valuable as December 2018 became the worst December since the Great Depression!
The causes of this downgrade are the result of negative changes in technical indicators (Technical Price Action, Breadth and Volatility). Fundamental indicators (Leading Economic Indicators and Earnings) remain positive. Although there is currently a disconnect between the two, we still advise taking caution in these environments. Technical indicators are better timing tools than fundamentals. They give more false signals but are also early warning signs for changes in fundamental signals.