This indicator gives a picture of when risk is increasing, and therefore when you might want to start taking some money out of risky assets.
All of the last seven recessions were preceded by a risk score of 3 or higher. Six of them were preceded by a risk score of 4 or higher. Unfortunately data prior to 1965 was inconsistent and prior recessions could not be considered.
Based on the indicator hit rate at successfully flagging recessions over the last 50 years, risk scores have the following approximate probabilities of recession:
- 0-1: Low
- 2: 25% within next 18 months
- 3: 30% within next 12 months
- 4-7: 50% within next 12 months
Note that a score of 3 is not necessarily a cause for panic. After all, there are substantial rewards to be had in the lead up to recessions (averaging 19% following yield curve inversion). For the brave, staying invested until the score jumps to 4+, or until the S&P500 drops below the 200day MA, will likely yield the best returns.
Notes on use:
- use MONTHLY time period only (the economic metrics are reported monthly)
- If you want to view the risk Score (1-7) you need to set your chart axis to "Logarithmic"
Enjoy and good luck!
Ganz im Sinne von TradingView hat der Autor dieses Skripts es als Open-Source veröffentlicht, damit Trader es verstehen und überprüfen können. Ein Hoch auf den Autor! Sie können es kostenlos verwenden, aber die Wiederverwendung dieses Codes in einer Publikation unterliegt den Hausregeln. Sie können das Skript den Favoriten hinzufügen, um es auf dem Chart zu verwenden.