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Fully Recovered, but Hardly Healthy

Recently a few of the large stock indices in the U.S. have nearly recovered to pre-COVID-19 values after suffering 25-35% selloffs just a few months back. But, does the current price level of the markets accurately reflect the health of our economy? This is the question that continues to perplex investors and economists alike.

Many people try to second guess the will of the market and overlay their own personal views to derive an investment path that suits their own investment goals. The complexity of today's market is proving difficult for many investors to process, and seems to be leading many investors not properly prepared for potential risks. As an organization, we are currently positioned "Risk-On" in the U.S. stock market (meaning we own our "normal" long term allocation to U.S. stocks in our strategies). We feel this would be a good time to share some insights on what we see as potential risk triggers for the U.S. markets (things that would potentially cause us to move to a "Risk-Off" stance and reduce stock exposure for our clients.)

As a baseline, we need to acknowledge a few observations that help us understand trends currently influencing money flows in US markets.