Backtesting Arena

Backtesting Arena

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Methodology — Macro Regime

How we measure, normalize, and weight 18+ macro components.

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🧮 Composite Score (0-100)

The composite score is the weighted sum of 6 tier scores. Each tier yields 0-100, then they feed into the composite by spec-weight:

  • 💧 Liquidity — 30%
  • 🏦 Financial Conditions — 20%
  • 🎲 Risk Appetite — 15%
  • 🪙 Crypto Liquidity — 10%
  • 📈 Business Cycle — 15%
  • 📊 Inflation & Real Rates — 10%

Each component is linearly normalized (or inverted) to 0-100 depending on whether higher values are bullish or bearish. Example: VIX high → bad for risk assets → low score. Fed Net Liquidity high → good → high score.

The composite score determines the regime label (risk_off < 30 / neutral 30-50 / risk_on_leaning 50-70 / risk_on > 70). The 2D matrix quadrant axis combines the two most important sub-scores: Liquidity (Tier 1+2 weighted) on Y, Cycle (Tier 5) on X.

💧 Liquidity— 30% weight

7 components

Fed Net Liquidity

Fed Net Liquidity = Fed Balance Sheet minus Treasury General Account minus Reverse Repo. Measures liquidity actually circulating in the banking system. Rising = more available for risk assets, falling = less.

Source: FRED (WALCL − WTREGEN − RRPONTSYD)

Fed-Bilanzsumme (WALCL)

Fed Balance Sheet (WALCL): total assets held by the Federal Reserve. Grows during Quantitative Easing, shrinks during Quantitative Tightening. Direct indicator of monetary policy direction.

Source: FRED Series WALCL · FRED →

Treasury General Account

Treasury General Account (TGA): the US Treasury's bank account at the Fed. A rising TGA drains liquidity from the banking system, a falling TGA injects it.

Source: FRED Series WTREGEN · FRED →

Reverse Repo (RRP)

Reverse Repo Facility: money market funds park cash short-term at the Fed against Treasuries. High RRP = idle cash, low RRP = capital seeking riskier investments.

Source: FRED Series RRPONTSYD · FRED →

Fed Funds Rate

Federal Funds Rate: the overnight rate between US banks, the Fed's primary monetary policy instrument. Higher rate = more expensive money = brake on risk assets.

Source: FRED Series FEDFUNDS · FRED →

Globale CB-Liquidität YoY (G3)

Global central-bank liquidity (G3) year-over-year: sum of the Fed, ECB and BoJ balance sheets in USD, YoY. A proxy for broad money — NOT true "Global M2" (the Big-5 M2 series were discontinued on FRED). Expanding central-bank balance sheets (QE) = more liquidity for asset markets, shrinking (QT) = less. China (PBoC) is missing for lack of a current free source → "G3", not literally global.

Source: Fed WALCL + ECB ECBASSETSW + BoJ JPNASSETS (FRED), FX-umgerechnet in USD

Fed Cuts Priced

Number of rate cuts priced in by Fed Funds Futures for the next 12 months. More expected cuts = market expects more expansionary policy = bullish for risk assets.

Source: CME FedWatch Tool (Phase B: Scrape geplant)

🏦 Financial Conditions— 20% weight

2 components

Chicago NFCI

Chicago Fed National Financial Conditions Index: 105 variables across money market, bond market, equities, FX, banking. Negative = loose financial conditions, positive = tight.

Source: FRED Series NFCI · FRED →

St. Louis Fed FSI

St. Louis Fed Financial Stress Index (STLFSI4): composite of 18 weekly series (rates, yield spreads, credit spreads, volatility). 0 = average financial conditions, negative = below-average stress (calm/loose), positive = above-average stress. An independent second FCI alongside the Chicago NFCI — the FRED-native replacement for the proprietary Goldman Sachs index originally planned here. Both measures co-move strongly; the added value is mainly robustness + a second-institution cross-check.

Source: Federal Reserve Bank of St. Louis (FRED: STLFSI4), wöchentlich

🎲 Risk Appetite— 15% weight

4 components

VIX

CBOE Volatility Index: implied 30-day S&P 500 volatility from options prices. <12 = complacency, 12-20 = normal, 20-30 = nervous, >30 = panic.

Source: FRED Series VIXCLS · FRED →

NFCI Credit Subindex

NFCI Credit Subindex (NFCICREDIT): the credit sub-component of the Chicago Fed National Financial Conditions Index — bond spreads, credit availability and demand in standard-deviation units. Negative = loose credit conditions / risk-on, positive = credit stress / risk-off. Replaces the high-yield spread (license + history withdrawal).

Source: FRED Series NFCICREDIT (Federal Reserve Bank of Chicago) · FRED →

US-Dollar-Index (DXY)

US Dollar Index (DXY): USD rate against basket of EUR, JPY, GBP, CAD, CHF, SEK. Strongly rising DXY drains liquidity from risk assets worldwide (dollar funding stress).

Source: FRED Series DTWEXBGS · FRED →

MOVE Index

ICE BofA MOVE Index: implied volatility of US Treasury options — the "VIX for bonds". High MOVE = rate uncertainty, often a precursor to equity stress.

Source: ICE BofA (Phase B: Scrape geplant)

🪙 Crypto Liquidity— 10% weight

2 components

Stablecoin MCap 30d-Veränderung

Change in total stablecoin market cap (USDT + USDC + DAI + ...) over 30 days in USD. Growing stables = fresh fiat capital flowing into the crypto system.

Source: DefiLlama (Phase B: API geplant)

BTC ETF Netflow 30d

Cumulative net flow into Spot Bitcoin ETFs (BlackRock IBIT, Fidelity FBTC, ...) over the last 30 days. Persistently positive = structural demand, persistently negative = distribution.

Source: Farside Investors (Phase B: Scrape geplant)

📈 Business Cycle— 15% weight

5 components

OECD Composite Leading Indicator

OECD Composite Leading Indicator USA: leading indicator for 6-9-month business cycle. >100 = above trend (expansion), <100 = below trend (contraction). Turning points typically visible ~6 months before GDP turns.

Source: OECD (CC BY 4.0) via FRED Series USALOLITOAASTSAM · FRED →

Consumer Confidence Index

OECD Consumer Confidence Index USA: sentiment of US consumers. >100 = optimistic, <100 = pessimistic. Driver of consumer spending (70% of US GDP).

Source: OECD (CC BY 4.0) via FRED Series CSCICP03USM665S · FRED →

Industrieproduktion YoY

US Industrial Production year-over-year: output of US manufacturing, mining, and utility sectors. Contracting = real-economy weakness, expanding = expansion.

Source: FRED Series INDPRO · FRED →

Initial Jobless Claims (4w avg)

Initial Jobless Claims (4-week average): weekly first-time US unemployment claims. Rising = labor market deteriorating, falling/low = robust. Very early business-cycle indicator.

Source: FRED Series ICSA · FRED →

Yield Curve 10y-2y

Yield Curve Spread (10-Year minus 2-Year US Treasury): classic recession indicator. Inversion (negative) preceded every US recession since 1970, with a 12-24 month lead time.

Source: FRED Series T10Y2Y · FRED →

📊 Inflation & Real Rates— 10% weight

2 components

Breakeven Inflation 10y

10-Year Breakeven Inflation Rate: market-implied US inflation expectation over 10 years from TIPS spread. Anchored (~2%) = Fed credible, rising = inflation concern returning.

Source: FRED Series T10YIE · FRED →

10-Year Real Yield

10-Year Real Yield (TIPS): inflation-adjusted 10-year Treasury yield. High real yield = cash/bonds attractive, bad competition for risk assets. Negative = TINA for equities/crypto.

Source: FRED Series DFII10 · FRED →

⚠ Disclaimer & Limitations

  • The composite score is a snapshot analysis from publicly available macro data — not a forecast, not a trading recommendation.
  • Data staleness: FRED series update at different cadences (daily to monthly). Stale components are flagged in the snapshot.
  • Credit component (NFCI Credit Subindex, Tier 3) is weekly (dated Friday, released ~the following Wednesday) — like the Tier-2 NFCI. Risk appetite therefore reacts more slowly to acute risk-off than with a daily spread; VIX and dollar trend remain the daily inputs.
  • Weights are heuristically chosen and re-calibrated when backtest evidence warrants. Last re-calibration: Spec v0.3 (2026-05).
  • Phase-B components (Global M2, GS FCI, MOVE, Fed Cuts Priced, Stablecoin MCap, ETF Netflow) are currently placeholders — scrapes pending.

Data Sources & Attribution

  • Macro data retrieved from FRED, Federal Reserve Bank of St. Louis (fred.stlouisfed.org).
  • Copyright, Chicago Board Options Exchange, Inc. Reprinted with permission. CBOE Volatility Index: VIX [VIXCLS], retrieved from FRED, Federal Reserve Bank of St. Louis.
  • Federal Reserve Bank of Chicago, Chicago Fed National Financial Conditions Index [NFCI], retrieved from FRED, Federal Reserve Bank of St. Louis.
  • Federal Reserve Bank of Chicago, Chicago Fed National Financial Conditions Credit Subindex [NFCICREDIT], retrieved from FRED, Federal Reserve Bank of St. Louis.
  • Board of Governors of the Federal Reserve System (US), Overnight Reverse Repurchase Agreements: Treasury Securities Sold by the Federal Reserve in the Temporary Open Market Operations [RRPONTSYD], retrieved from FRED, Federal Reserve Bank of St. Louis.
  • Federal Reserve Bank of St. Louis, 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity [T10Y2Y], retrieved from FRED, Federal Reserve Bank of St. Louis.
  • Federal Reserve Bank of St. Louis, 10-Year Breakeven Inflation Rate [T10YIE], retrieved from FRED, Federal Reserve Bank of St. Louis.
  • OECD, Main Economic Indicators (database), https://dx.doi.org/10.1787/data-00052-en. Copyright, OECD. Reprinted with permission.

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