How We Suggest That You Measure Risk

The mainstream financial news media has begun suggesting that the financial markets are in a period of accepting more risk. The Wall Street Journal reported earlier this week that the S&P 500 and the S&P GSCI (a broad-based measure of commodities) climbed at least 5% in the last 5 consecutive quarters - a first. And what does that mean? The pundits say it is a sign that there is demand by investors for riskier investments.

We agree that there are pockets of the financial markets that show an increasing appetite for risk. But we also think that a clearer picture of risk is defined by looking at current prices versus moving averages rather than just looking at quarterly performance over a period of time.

And by that metric, while there are some instruments that show investors are is a "risk-on" mode, by-and-large, the markets are not jumping head-over-heels into risky investments.

At Excalibur Pro, we have devised tools that help you track risk in the markets. Our trackers show that the NYSE FANG ETF and the 10-year bonds of Spain and Portugal are showing some risk characteristics. But many of the other classic "risk" instruments (S&P 500, SSE Composite, MSCI Emerging Markets ETF, the cross currency AUDJPY and even Bitcoin) are more in a neutral position.

So, generally speaking, we don't think there is concern at this time about markets being overly risk tolerant. At least not yet...