Every macro framework works until it does not. The valuable skill is not having a framework — frameworks are cheap — but noticing early when the one you are using has stopped describing reality.
- An established relationship inverts: liquidity expands while risk assets fall, sustained over weeks rather than days.
- A stress indicator moves independently: credit spreads widen while equities are still rising.
- Breadth diverges from the index: the cap-weighted index rises while the typical constituent falls.
- Correlations rise together: previously unrelated assets start moving as one, usually meaning liquidity has become the dominant driver.
- An event produces the opposite reaction to the mechanical expectation, repeatedly rather than once.
VILIQ is built to surface these rather than smooth them over. Edge strength is measured continuously, so a weakening relationship shows up as a thinning line. Event impacts flag a market reaction anomaly when the move contradicts the mechanical expectation. The regime classifier shows its runner-up so a narrowing gap is visible before the label flips.
Common belief
"The model stopped working, so the model is wrong."
What is actually true
A model that describes one regime well will describe another badly — that is what a regime is. The failure mode is not the model breaking; it is continuing to apply it after conditions changed. This is why every VILIQ score publishes its invalidating conditions alongside it.
Liquidity has been expanding for two months and equities have followed. Then credit spreads begin widening while liquidity is still expanding. Two weeks later breadth turns negative while the index holds. Three weeks after that the index falls. The first signal preceded the price by more than a month, and the framework that said "liquidity is expanding so equities rise" was still technically true about liquidity the whole time.