The weighted index combining all 6 normalized factors: Sahm (15%), MOVE (20%), Trend (20%), Yield Curve (15%), Fed Funds (20%), and Oil (10%). Score > 65 marks regime shift to full Risk-Off.
Fed Funds 12M Change (Weight: 20%)
Monetary tightness gauge. Rapid policy tightening of ≥ 2.50% over a 12-month span exhausts market liquidity and impacts stock valuations.
MOVE Index (Weight: 20%)
Implied volatility of US Treasury options (the bond market's VIX). Readings above 120 indicate severe liquidity stress in credit markets, which cascades into stock corrections.
Trend Momentum (Weight: 20%)
Measures how far the S&P 500 price has fallen below its 200-day Simple Moving Average (SMA). Price trading above the SMA represents 0% risk; risk scales to 100% if the index drops ≥ 10% below it.
Yield Curve Inversion (Weight: 15%)
Checks for yield spread inversion (T10Y2Y ≤ 0). Inversions represent forward macroeconomic expectations of economic slowdown.
Sahm Rule Indicator (Weight: 15%)
Recession warning triggers when the 3-month moving average of national unemployment rises by ≥ 0.50% from its 12-month low. Unbelievably accurate coincident recession indicator.
Oil Price Shock (Weight: 10%)
Exogenous inflationary supply-shock stress. Measures the 12-month percentage increase in WTI crude oil. Price increases exceeding +15% begin scaling risk, capping at +50%.