Question 1

What is a Risk-On vs Risk-Off market regime?

Accepted Answer

In a Risk-On regime, investors seek higher returns by buying equities, Bitcoin, commodities, and emerging markets — typically when growth is positive, liquidity is expanding, and volatility is low. In a Risk-Off regime, capital retreats to safe havens: US Treasuries, gold, the Japanese Yen, and cash. Understanding which regime you are in is the most important macro decision a trader can make.

Question 2

How is the Macro Risk Indicator score calculated?

Accepted Answer

The Macro Risk Indicator aggregates 6 pillars: monetary policy stance (dovish/hawkish), inflation trajectory (rising/falling), economic growth (PMI, GDP), global liquidity (GLI and M2), market sentiment (VIX, credit spreads), and technical positioning (trend and breadth). Each pillar is scored 0–100. The composite score above 60 signals Risk-On; below 40 signals Risk-Off.

Question 3

What happens to gold and bonds in a Risk-Off regime?

Accepted Answer

In a Risk-Off regime (score below 40), capital flows into safe-haven assets. Gold typically rallies as investors seek inflation protection and store of value. US Treasury bonds rally as yields fall (flight to quality). The Japanese Yen and Swiss Franc strengthen. These safe havens are natural hedges — having exposure to them when the macro score deteriorates can significantly reduce portfolio drawdowns.

Question 4

How quickly can macro regimes change?

Accepted Answer

Macro regime shifts typically take 4–8 weeks to fully materialize, but warning signs appear earlier in leading indicators like the yield curve, credit spreads, and M2 trends. The fastest regime shift in recent history was COVID (March 2020): Risk-On to extreme Risk-Off in 3 weeks, then back to Risk-On in 5 months as the Fed deployed $4.4T in QE. Monitoring the macro score in real time provides early regime change alerts.

Question 5

Should I sell everything in a Risk-Off regime?

Accepted Answer

Not necessarily. A Risk-Off score (below 40) suggests reducing exposure to high-beta risk assets (growth stocks, crypto, commodities) and increasing allocation to safe havens (gold, bonds, cash). A Transition score (40–60) suggests selective positioning with smaller size. Complete liquidation is usually only warranted at extreme readings below 25, which have historically coincided with major market dislocations.

Macro Risk Indicator

6-Pillar Breakdown

Macro Risk Score — Historical

Understanding Macro Regimes

Related Research

Macro Risk Indicator — FAQ

Monitor Macro Regimes Live