I get the first four column headers, they're the classic view of +/- growth crossed with +/- inflation. But what is -L? A fudge factor?
And what do these row headers mean? My guesses ... The first four row headers -- the probabilities -- they look at relative performance of asset classes over different time windows, and correlate them with the four regimes, where a 100% would mean it's a perfect match with a regime. The fifth one, it's how much time on average we're in that regime.
The (-) L is for tightening liquidity conditions, which is extremely relevant in today's content. Liquidity is the stock of safe assets available in the economy and measures funding liquidity. Markets with tightening liquidity conditions tend to show weak performance across assets, with yield curves inverting & valuations cheapening. We actually have measures of 8 different (+/-) regimes based on Growth, Inflation, & Liquidity- but we compress the 4 tightening liquidity conditions into one regime as it is the most impactful and also to over-splicing our data.
I don't understand the market regime monitor.
I get the first four column headers, they're the classic view of +/- growth crossed with +/- inflation. But what is -L? A fudge factor?
And what do these row headers mean? My guesses ... The first four row headers -- the probabilities -- they look at relative performance of asset classes over different time windows, and correlate them with the four regimes, where a 100% would mean it's a perfect match with a regime. The fifth one, it's how much time on average we're in that regime.
Is my interpretation correct?
Hi,
The (-) L is for tightening liquidity conditions, which is extremely relevant in today's content. Liquidity is the stock of safe assets available in the economy and measures funding liquidity. Markets with tightening liquidity conditions tend to show weak performance across assets, with yield curves inverting & valuations cheapening. We actually have measures of 8 different (+/-) regimes based on Growth, Inflation, & Liquidity- but we compress the 4 tightening liquidity conditions into one regime as it is the most impactful and also to over-splicing our data.