The above two dials provide a snapshot of our market view and attitude to risk.
Bull/Bear Market
The Bull/Bear Market indicator fell to 40% last Friday from 80% on November 9th.
The most recent bear signal is heavy truck sales, which plunged to a seasonally adjusted 32.5 thousand units in October 2024 from a peak of 46.1 thousand in May 2023.
There are now three of five indicators signaling Risk-off:
Stock Pricing
The Stock Pricing indicator compares stock prices to long-term sales, earnings, and economic output to gauge market risk. We use z-scores to measure each indicator’s current position relative to its history, with the result expressed in standard deviations from the mean. We then calculate an average for the five readings and convert that to a percentile.
Stock pricing remains in the extreme range, at the 97.83 percentile compared to 97.67 last Friday, warning that stock prices have the potential for large drawdowns.
Conclusion
We are headed for a bear market, with our allocation to risk assets declining to 40%.
Stock pricing is also extreme, warning of the potential for large drawdowns.