Today is very RISK-OFF in the US common stock market

By Jeffrey Cohen, President, US Advanced Computing Infrastructure, Inc.

Good morning. Today we ran our Chicago Quantum Net Score and the results suggest a highly diversified, and large portfolio of stocks to mitigate the increase in risk in the US stock market.

Net-net: our model picks optimized long stock portfolios where each stock is held equally. Last night, after the standard run, it suggested 54 stocks. We ran it again 'just to be sure' and the best answer is now 55 stocks with only a very minor improvement in edge or alpha.

55 stocks is less than 2% in each position. This is a risk off market.

The overall market 'return to risk' is lower today as well, as short-term interest rates and US Treasury bills (around 13-week maturity) are yielding 4.90%, or there are suitable investments in money markets or US iSeries savings bonds for retail investors. This has the expected future return to risk at 3.67%. Would you 'risk it all' for less than 4% gain? That question is becoming more difficult as stock market sectors rotate quickly.

For example, we have been following US savings bank stocks for months. Yesterday, $SIVB or SVB Bank, the 15th largest US bank, did the thing that Merrill Lynch did years ago in the GFC. They caused a "Mark to Market" for recently untraded securities. They needed to raise liquidity, and they sold around $21B in assets, and lost almost $2B. This causes a market to market likely on the rest of their risky assets of -10% or worse, and this is now the 'standard' for other banks.

So, in one day, the banks fell 4% or more. We saw this coming, but now that it is reflected in stock prices it gives us pause and concern.

Good luck today. 

We will make a YouTube video this morning before market open.
​  https://www.youtube.com/@IamJeffreyCohen