US economic risk increased at the end of August, according to a markets-based estimate of macro conditions. The Macro-Markets Risk Index (MMRI) closed at +0.4% yesterday (August 31) after briefly slipping into mildly negative territory for several days last week. MMRI’s temporary dip into the red in late-August marks the first negative readings since early 2012. It’s important to note that while a markets-based view of the business cycle has turned cautious lately, there’s no confirming support in the hard economic data–at least not based on published numbers to date.

Meantime, a markets-based measure of the business cycle is flashing a warning sign for the US economic outlook. A decline below 0% in MMRI indicates that recession risk is elevated while readings above 0% imply that the economy will expand in the near-term future.

Analyzing market-price data in the financial and commodities markets with a probit model also suggests that business-cycle risk has increased. Nonetheless, the current probit-based reading remains well short of an all-out recession call.

Let’s take a closer look at the numbers, starting with MMRI, which represents a subset of the Economic Trend & Momentum indices (ETI and EMI), a pair of benchmarks that track the economy’s broad trend for signs of major turning points in the business cycle via a diversified set of indicators. (For details about ETI and EMI, see my book on monitoring the business cycle.) Analyzing the market-price components separately offers a real-time approximation of macro conditions, according to the “wisdom of the crowd.” Why look to the financial and commodity markets for insight into the economic trend? Timely signals. Conventional economic reports are published with a time lag. MMRI is intended for use as a supplement for developing real-time perspective until a complete data set is published for updating the monthly economic profile.

MMRI measures the daily median change of four indicators based on the following calculations;