Macro-Markets Risk Index Remains Well Above Danger Zone
James Picerno | Jul 03, 2013 07:22AM ET
US economic conditions have stabilized in recent days, according to a markets-based profile of the macro trend. The deterioration that persisted through most of June has, for the moment, subsided. Even after the sharp decline in the Macro-Markets Risk Index (MMRI) in recent weeks, this benchmark closed yesterday (July 2) at 7.0%--a level that suggests that business cycle risk remains low. Although MMRI is now at its lowest value since last August, it’s still well above the danger zone of 0%. If MMRI falls under 0%, that would be a sign that recession risk is elevated. By comparison, readings above 0% imply economic growth.
MMRI represents a subset of the indicators in the this post that introduced the index. Meanwhile, here's how MMRI compares on a daily basis since August 2007:
Here's a closer review of how MMRI stacks up so far this year:
[1] The credit spread data uses a 260-day window rather than a 250-day window that's used as a proxy for one-year changes because the High Yield Master II Index data set is published on weekends as well as weekdays. As a result, a slightly longer time window is required for the high-yield numbers to approximate a one-year period that aligns with the one-year (250-day) window used for stocks and oil prices, which aren't published on weekends.
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