A thermometer of stress in the US economy and markets. It combines 17 public data points into a number from 0 to 100.
How do you read it?
0–35 Normal: all calm.
35–60 Alert: there are signs of stress.
60–100 Crisis: a lot of stress at once, as in 2008.
What is it for?
To detect in time that stress is rising. If the situation worsens, the index changes level; in the 4 official recessions since 1990 it reached at least Alert.
Words you may not know
Recession
A period in which the economy shrinks: less is produced and spent, and unemployment rises.
Bond
A loan that is bought and sold: the government or a company owes you money and pays you interest.
Interest rate
The price of money: what it costs to borrow it.
Credit
Money lent to companies or people. If it dries up, the economy slows.
Stock market
The market where shares are bought and sold (little pieces of companies).
Strong dollar
The dollar is worth more than other currencies. It makes dollar debts more expensive outside the US.
Safe haven
What people buy when they are afraid, such as gold.
A shortcut: 5 simple checks, each with its own limit. With 3 or more active at once, it counts as an emergency.
Emergency from 3
Copper vs gold—
How is the number calculated?
step by step, with today’s data
Each data point gets a score from 0 (calm) to 100 (very stressed). They are grouped into 5 areas with different weights (credit and jobs weigh more). If several areas are stressed at the same time, an extra is added. The result is the number at the top.
Score for each area
The steps
How much does each data point contribute to the total?
Value, score, weight and contribution of each data point
Indicator
Value
Score
Weight
Adds
Sum (before the extra)
—
The weights were set in advance, without adjusting them to past data. Gold and copper are not scored by their price: they come in through how their relationship changes over a year.
The 17 data points, one by one
what each one measures and how it looks
Data points: current value, recent trend, concern threshold, closeness to the threshold and status
We recreate the index with the data of each period to see whether it would have sounded the alarm before crises such as 2008 or 2020.
How would the index have looked since 1990?
Each week, with the data available at the time. It spiked in 2001 and 2008. The gray bands are official recessions; the blue ones, the crises we analyze here.
These are rules based on past crises, not forecasts.
01How is the number calculated?
Each data point gets a score from 0 to 100 and is grouped into 5 areas with different weights: credit 30%, interest rates and cycle 20%, jobs 20%, markets 15% and output and spending 15%. If several areas are stressed at the same time, an extra is added.
Normal: below 35 · Alert: 35 to 60 · Crisis: 60 or more.
02The 5 quick alarms
Risky-company credit above 5%, dollar above 106, long rates rising back above short rates after an inversion, VIX above 30 and a rise in unemployment of 0.5 points or more.
With 3 or more active at once, it counts as an emergency.
03Where the data comes from
From FRED (the St. Louis Federal Reserve database) and Yahoo Finance. Some arrive days or weeks late: each data point shows its date.
04What has it detected so far?
2001 and 2008: it rose to Alert or Crisis months before the worst moment.
COVID (2020): Alert in the first week and Crisis a few weeks later.
Official recessions: all 4 since 1990 reached at least Alert.
Shorter stock market drops (2011, 2015-16, 2018): the signal is milder, because the index focuses on crises that affect credit and the real economy.
05If the emergency triggers
Check how much of your invested money is borrowed.