Macro Markets Risk Index: US Trend Steady At Moderate Pace
The US economic trend remains moderately positive as of early May, based on a markets-based estimate of macro conditions. The Macro-Markets Risk Index (MMRI) closed at +6.7% yesterday (May 12), a middling value relative to the benchmark’s range for the year so far. The moderately positive reading implies that business cycle risk remains low. A decline below 0% in MMRI would indicate that recession risk is elevated; readings above 0% imply that the economy will expand in the near-term future.
MMRI represents a subset of the Economic Trend & Momentum indices (ETI and EMI), 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. (For details about ETI and EMI, see my book on monitoring the business cycle.
MMRI measures the daily median change of four indicators based on the following calculations;
• US stocks (S&P 500), (SPY) 250-trading day % change
• Credit spread (BofA (BAC) ML US High Yield Master II Option-Adjusted Spread), inverted 250-trading day % change
• Treasury yield curve (TNX) (10-yr Treasury yield less 3-month T-bill yield)
• Oil prices (iPath S&P GSCI Crude Oil Total Return Index ETN (OIL)), inverted 250-trading day % change
Here’s how MMRI compares on a daily basis since August 2007:
Here’s a closer look at how MMRI compares on a daily basis over the past year:
