financial conditions regime
What it checks
The Chicago Fed's NFCI is the most comprehensive single-number measure of financial conditions, combining money market, debt, equity, and shadow-banking signals. When it goes above zero (tight), trim risk; when its adjusted version goes well below zero (loose), lean in.
Mechanism
Chicago Fed NFCI and adjusted ANFCI are weekly composites spanning ~105 measures of money / debt / equity / shadow-banking conditions. NFCI > 0 (tighter conditions) leads real activity by 2-4 quarters with elevated equity left-tail risk; ANFCI < -0.5 (notably loose) signals risk-on regimes.
Signal rule
NFCI > 0 + 60d downtrend fires SHORT 42d; ANFCI < -0.5 + uptrend fires LONG 42d.
Data dependencies
daily_pricesAdjusted-close OHLCV for every US-listed ticker; primary price feed.
fred_macroWorker data table, see services/worker schema.
Expected edge
- Paper alpha
- +/-3 to +/-4% over 42d
- Paper window
- T+1 to T+42d
Brave-Butters 2011; ~4% over 42d on tightening + downtrend; ~3% LONG on loose ANFCI + uptrend.
Related families
macro regimeMacroBeyond regime_overlay (#10) which uses VIX + SPY trend, this family keys off the macro regime detected from FRED data: term-spread inversion (10Yโ2Y < 0), credit-spread widening or compression (BAAโ10Y z), and Fed funds cycle direction. Single-name version: gate the simple long-trend signal (SMA50 > SMA200) on the FRED macro regime โ full long only in risk-on, half-size in neutral, flat in risk-off, short in inversion.
ted funding stressMacroTED spread (3-month LIBOR minus 3-month Treasury, FRED TEDRATE) is the canonical proxy for interbank funding stress. Widening TED forces funding-constrained intermediaries to deleverage, creating fire-sale pressure on high-beta and small-cap names.
credit spread shockMacroGilchrist-Zakrajsek 2012 AER show the excess-bond-premium component of credit spreads predicts equity returns at 1-3mo horizons with Rยฒ up to 12%. We use raw BAA-10Y (Moody's BAA corp minus 10Y Treasury) from FRED as the cheap proxy. Widening shock = risk-off pressure (short high-beta names with downtrend); sharp compression = risk-on regime (long beta names with uptrend).
Explore financial conditions regime on alphactor.ai
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