Palanor: Risk Appetite

Overview

Palanor: Risk Appetite is a single 0–100 read of how much risk the market is willing to take. High readings indicate vol compressed, spreads tight, sentiment greedy, equities running, BTC running, gold quiet — the textbook risk-on regime. Low readings invert all of it.

Why these components

The VIX gets the highest weight because realized and implied equity volatility is the most direct read of risk appetite. High-yield OAS is the credit-market mirror — when risk appetite contracts, junk spreads widen. CNN Fear & Greed is the market-sentiment composite, included alongside (not in place of) the structural measures. Equity momentum (S&P 500) and crypto momentum (BTC) read directional flow; gold, sign-flipped, reads safe-haven demand.

Methodology

Each component is z-normalized or transformed to a comparable scale and sign-flipped where negative. The weighted sum maps through a logistic to 0–100. The index is most informative in regime detection and inflection rather than as a level claim.

Interpretation

Readings above 70 indicate a textbook risk-on regime — the regime in which leverage builds and complacency compounds, the conditions Minsky described as the prelude to instability. Readings below 30 indicate risk-off, the regime in which dispersion widens and capital becomes scarce. The most informative divergence is between VIX and HY OAS: when vol stays low but credit spreads widen, credit is seeing what equity is not.

Caveats

Equity-vol-led indices like this one will mechanically run hot whenever VIX is compressed, even if that compression is itself fragile. The BTC component adds noise; we weight it modestly. Gold's sign flip is contestable — gold can rise on inflation as well as on risk-off — and we accept that ambiguity in exchange for the safe-haven information.

Components & Weights

Every component, every weight. The 30-day spark shows how the underlying series has moved; the transform column shows how it converts to a comparable scale before weighting. Direction indicates whether rising values raise or lower the index.

Historical

24-month history of this index. The composite is recomputed daily; values are stored with timestamps.

References

• FRED — Federal Reserve Economic Data, St. Louis Fed. https://fred.stlouisfed.org/
• Atlanta Fed — Wage Growth Tracker and Sticky-Price CPI. https://www.atlantafed.org/research
• Cleveland Fed — Model-based inflation expectations. https://www.clevelandfed.org/our-research/indicators-and-data
• OECD — Composite Consumer Confidence Indicator. https://data.oecd.org/leadind/consumer-confidence-index-cci.htm
• CNN Business — Fear & Greed Index. https://www.cnn.com/markets/fear-and-greed
• Google Trends — interest over time. https://trends.google.com/