A Multi-Indicator Traffic Light for Recession Risk

Summary

This indicator turns several macroeconomic and market series into a color coded dashboard and a simple composite recession risk score. Its inputs include S&P 500 moving average growth, the US 10 year versus 3 month Treasury yield spread, M2 direction, a GDP series, the rhodium to gold ratio, and a selectable leading economic indicator. Each series is classified as favorable, adverse, or in some cases neutral based on its direction or threshold.

The script adds fixed point contributions for each state to form a displayed percentage-like score and flags a warning when that score exceeds a user-set threshold. It also plots a separate historical recession series for comparison and can issue alerts. This score is a rule based aggregation, not a statistically calibrated probability forecast; the document gives no validation or predictive performance evidence. Data frequencies differ across inputs, and the leading indicator and growth thresholds are configurable or simplified, so interpretation depends on data availability and chosen settings.

Key ideas

• The dashboard combines market growth, yield curve, money supply, GDP, precious metal ratio, and a leading indicator.
• Each component is reduced to a directional state and contributes a preset amount to the composite score.
• A user selected threshold determines whether the script displays a recession warning and sends alerts.
• The historical recession series is plotted alongside the indicator for context, but no forecast validation is supplied.
• The displayed score is a heuristic index and should not be read as a calibrated probability.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.