What if Recession Risk Could be Reduced to a Single Signal?

The Wait Is Over.

 

For the last couple of months I’ve been telling you that something big is coming to Pioneer Financial. I’ve been intentionally vague about what it was. Not because I wanted to manufacture hype, but because I didn’t want to announce something until I was confident it was ready.

 

Today, I can finally tell you what I’ve been working on. And in reality, this project didn't begin months ago, It began years ago.

 

For years, I’ve been fascinated by one of the most difficult questions in economics and investing:

 

What actually causes an economy to transition from expansion into recession?

 

I didn't want another indicator that simply told us the economy was already in trouble. I wanted to understand whether the conditions that tend to develop before a recession could be identified, measured, and ultimately turned into something systematic.

 

Over the last several months, I took years of research, testing, and ideas and began turning them into exactly that. Today, that work becomes part of Pioneer Financial.

 

Introducing the Harlow Composite Recession Indicator.

 

(HCRI)

 

A proprietary, rules-based framework designed to measure changing economic conditions and help identify when recession risk may be strengthening or weakening. The Harlow Composite Recession Indicator is officially live on TradingView:

 

 

Regarding recessions, I wanted to understand what happens before the picture becomes obvious. That question ultimately became the foundation for something I’m incredibly excited to introduce today. So, let’s talk about it.

 

There Is No Shortage of Recession Indicators.

 

Yield curves, Employment data, Manufacturing surveys, Consumer data, Leading indicators, there are endless metrics out there that help an investor decide whether or not a recession is on the way. But, these indicators have a problem:

 

The problem is that the economy rarely deteriorates all at once.

 

Some indicators can remain strong while others begin weakening. Data can contradict itself. Markets can move before the economic data catches up. And by the time a recession becomes obvious in the headlines, the underlying conditions may have been changing for quite some time.

 

Below is the benchmark indicator research as it compares to HCRI. Note the dates that HCRI was triggered in comparison with official NBER recessions:

I wanted a way to systematically evaluate that changing environment rather than relying on any single headline or economic report.

 

That became the model.

 

HCRI takes my proprietary recession framework and expresses it through a single dynamic signal. But there is an important distinction I want to make from the beginning: HCRI is not designed to predict the exact date of the next recession. Economies are far too complex for me to pretend a single model can do that reliably.

 

Instead, HCRI is designed to help answer the simple question above:

 

Are the conditions associated with recession risk strengthening or weakening?

 

That allows the signal to be evaluated continuously as economic conditions evolve rather than simply producing a binary recession prediction.

 

 

Stress-Testing the Model

 

It would be easy to build a model that looks impressive historically by carefully selecting parameters that perfectly fit past recessions. But a model that only works under one very specific set of assumptions isn't particularly useful when the next economic cycle inevitably looks different from the last.

 

So, I tried to break my own model.

 

After establishing the framework, I went back through every U.S. recession dating back to 1955 and  tried to figure out the following:

 

How much can I change before the underlying behavior of the model begins to break down?

 

This type of robustness testing matters because a model shouldn't depend on one perfectly calibrated combination of parameters to produce meaningful results. If relatively small changes completely alter its historical behavior, that would suggest the model may be capturing historical noise rather than something more persistent. So, I changed each of the parameters by a reasonable amount and logged every result for the 10 NBER recessions since 1955. Here are the results below:

 

Green = No Change Yellow = Minor Change Red = Major Change

 

Simplified Results: No Change - 64% -> Minor Change - 36% -> Major Change - 0%.

 

This result demonstrates that the specific metrics hold up against reasonably economic change and remain significant measurements for recession. Again, the precise metrics are Pioneer Financial IP.

 

The Methodology Is Proprietary. The Signal Isn’t.

 

I’ve made a deliberate decision not to publicly disclose HCRI’s underlying components, transformations, weighting methodology, or implementation logic. That intellectual property represents years of research and development and will remain proprietary to Pioneer Financial. The three major components, S&P 500, labor, and credit, are the general economic sectors I used. The exact details of each will not be disclosed.

 

But the signal itself will not be hidden. As of today, HCRI v1.0 is frozen. Here is the raw data for how HCRI triggers during recessions dating back to 1955:

 

It means I’m not going to quietly change the model six months from now because the economic data moved in a way I didn’t expect and then pretend the revised model always looked that way.

 

From this point forward, HCRI can be evaluated prospectively and in real time. Historical performance is useful for understanding how a model behaves. But now comes the part that matters most:

 

What does it do next?

 

If you subscribe to the live chart you’ll see an interesting data point. More importantly, this data point demonstrates that I’m putting my entire reputation in the financial industry on the line.

 

Why I’m Making HCRI Available

 

One of the core goals of Pioneer Financial has always been to take concepts that are often reserved for institutions and make them understandable and useful for individual investors. HCRI is an extension of that philosophy.

 

Subscribers will be able to follow the indicator through TradingView, allowing them to incorporate HCRI alongside the charts and market data they already use.

 

Access will be invite-only and priced at $39.99 per month.

 

I've also published the HCRI White Paper, which explains why I built the framework, how the output should be interpreted, its historical behavior, its limitations, and the role I believe it can play in a retail investor’s broader decision-making process.

 

Beginning Today, HCRI Has a Public Record.

 

I’m putting it all out there, with my last name, so you know that this is authentic. If it produces a false signal, I fail. If it misses a recession, I fail. I’m confident in the research and don’t believe either of those things will happen.

 

Here you go!

 

HCRI is officially live. Click the link below to get more details.

 

🧭 Pioneer Financial

Innovative Investment Strategies

 

Disclaimer:

 

The views and opinions expressed in The Pioneer Perspective are those of Daniel Harlow and Pioneer Financial, LLC and are provided for informational and educational purposes only. Nothing in this publication constitutes financial, investment, tax, or legal advice.

 

Market data and information are obtained from sources believed to be reliable, but their accuracy cannot be guaranteed. Past performance is not indicative of future results, and all investments involve risk, including the potential loss of principal.

 

Readers are encouraged to conduct their own research or consult a qualified financial professional before making any investment decisions.
Back to blog

Leave a comment