Macro-Markets Risk Index: 9.4% | 4.08.2014

The US economic trend has remained positive and relatively steady in recent weeks, based on a markets-based profile of macro conditions. The Macro-Markets Risk Index (MMRI) closed at 9.4% on Monday, April 7–a level that suggests that business cycle risk remains low. A decline in MMRI below 0% would indicate that recession risk is elevated. By comparison, readings above 0% imply that the economy will expand in the near-term future.

MMRI represents a subset of the Economic Trend & Momentum indices, a pair of benchmarks that track the economy’s broad trend for signs of major turning points in the business cycle via a diversified set of indicators. Analyzing the market-price components separately offers a real-time approximation of macro conditions, according to the “wisdom of the crowd.” Why look at market data for insight into economic conditions? Timely signals. Conventional economic reports are published with a time lag. MMRI is intended for use as a supplement for developing perspective on the current month’s economic profile until a complete data set is published.

MMRI measures the daily median change of four indicators based on the following calculations:

• US stocks (S&P 500), 250-trading day % change, plotted daily
• Credit spread (BofA ML US High Yield Master II Option-Adjusted Spread), inverted 250-trading day % change, plotted daily
• Treasury yield curve (10-yr Treasury yield less 3-month T-bill yield), no transformation, plotted daily
• Oil prices (iPath S&P GSCI Crude Oil Total Return Index ETN (OIL)), inverted 250-trading day % change, plotted daily

Here’s how MMRI compares on a daily basis since August 2007:

mmri.08apr2014

Here’s a closer review of how MMRI stacks up over the past 12 months:

mmri.a.08apr2014

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