Contents
Important note. This content is strictly educational and informational. It does not constitute investment advice under AMF / MiFID II regulations. Past performance is not indicative of future results.
What is market risk?
Market risk is the possibility that an asset or a portfolio loses value because of price, rate, credit, liquidity or sentiment movements. It is not limited to crash risk: it also includes prolonged drawdowns, weak returns and unusually high volatility.
A market environment can be fragile without correcting immediately. Conversely, a correction can happen even when not all indicators are at extreme levels. This is why a serious reading of risk should remain probabilistic, historical and multi-factor.
A risk indicator does not provide a date. It helps understand whether the context is more or less demanding than its history.
Crashes, corrections and market cycles
ONELIX does not predict crashes. It compares the current context to regimes observed during major corrections (bear markets) and recovery phases (bull runs) since 1962. A few useful definitions first:
- Correction — roughly a 10% decline on a major index, often rapid.
- Bear market — at least a 20% decline on the S&P 500 over a prolonged period.
- Crash — common term for a major correction; at ONELIX, the 15 tracked episodes correspond to drawdowns of 19% or more since 1962.
Three reference episodes
Dot-com bubble (2000). Extreme valuation and tech euphoria. At the March 2000 peak, the LIX stood around 95% — a level historically associated with bear markets. That would not have predicted the exact break date, but it documented an overheated context.
Financial crisis (2008). Credit, leverage and systemic contagion. At the October 2008 peak, the LIX was around 79% — high vigilance before a nearly 57% S&P 500 drawdown.
COVID crash (2020). Exogenous shock and initial panic. In March 2020, the LIX was more moderate (~44%) than at the Internet bubble peak: sudden crises sometimes escape fundamental indicators. The LIX then fell during the 2020–21 recovery — illustrating easing stress, not an entry signal.
These episodes illustrate past risk regimes. They do not provide a date or magnitude for the next market crash.
For all 15 corrections and LIX performance at each peak, see the LIX guide and interactive analysis.
The main indicator families
ONELIX organizes market signals into several families. This separation avoids mixing different phenomena and helps identify which dimension of risk is actually under pressure.
- Valuation: market price compared with the real economy, earnings or a long-term trend.
- Rates & credit: cost of money, yield curve slope and risk premia in high yield credit.
- Macro cycle: slowdown, recession and investor balance sheet vulnerability indicators.
- Volatility & sentiment: stress observed in options prices, dispersion or safe-haven asset volatility.
- LIX & methodology: normalization and synthesis of signals to make periods comparable.
How to read a risk signal
A signal is not a conclusion. An elevated indicator may simply show that the market is expensive, financial conditions are tightening or volatility is rising. To be useful, it must be placed in its history and compared with other dimensions.
The same value can have a different meaning depending on rates, inflation, liquidity, corporate earnings or central bank reactions. Risk analysis therefore benefits from combining absolute level, trend, persistence and observed historical consequences.
Tension and favorable context
Risk reading is bidirectional. In high-vigilance zones (CRITICAL LIX, extreme valuation, tight credit), drawdowns of 20% or more over 24 months were historically more frequent than in calm zones. Conversely, a LIX in the SEREIN zone (< 20%) corresponds to a statistically less stretched context — without any return guarantee.
LIX reversals matter as much as absolute levels: a decline from a CRITICAL zone can accompany easing market stress after a crash; a rise from a low zone can signal the end of euphoria. This is not a mechanical rule or a buy/sell signal.
An isolated signal is rarely enough. A context becomes more robust when several indicator families point toward the same type of tension — or, conversely, converge toward a historically more favorable regime.
Explore ONELIX indicators
Compare signals, historical zones, drawdowns, returns and backtests in the application.
The ONELIX approach
ONELIX aims to turn heterogeneous indicators into a comparable reading. Some indicators are naturally expressed as percentages, others as standard deviations, spreads, volatility levels or composite scores. Normalization places them on a shared scale.
This reading does not replace judgment. It provides a framework to compare market regimes, follow risk over time and observe related historical statistics: drawdowns, returns, distribution of periods and backtest results on past data.
Interactive LIX analysis covers both sides: drawdown frequencies by zone (Drawdown tab) and high-return frequencies (Returns tab). The LIX guide details construction and reversal reading.
The limits of indicator-based analysis
Indicators are built from historical data. Their meaning can change when market structure evolves: monetary policy, sector composition, global revenue exposure, leverage levels or regulatory changes.
Two errors should therefore be avoided: ignoring signals because they do not predict perfectly, or giving them a precision they do not have. Their role is to improve clarity about the context, not to produce certainty.
ONELIX analyses are informational and statistical. They do not constitute a recommendation to buy, sell or allocate capital.
Frequently asked questions
Can a risk indicator predict a crash?
No. It helps contextualize a market environment, but it cannot predict the timing or magnitude of a correction on its own.
Why use several indicators?
Because each indicator observes a different dimension: valuation, rates, credit, economic cycle or volatility. Combining them reduces the risk of relying on one isolated signal.
What is the LIX score for?
The LIX score summarizes several indicator families into a normalized reading so the risk context can be compared more consistently over time.
Can the LIX also highlight statistical opportunities?
Yes, to contextualize historically more favorable zones (less frequent drawdowns, sometimes higher average returns over 24 months). This is not a buy signal or a guarantee of future performance.
What is the difference between crash, bear market and correction?
A correction is roughly a 10% decline; a bear market, at least 20% on a major index; crash often means a major correction. ONELIX tracks 15 episodes of 19% or more since 1962.
Does a low LIX signal a bull run?
No. A LIX in the SEREIN zone indicates a statistically less stretched context, but bull runs can last for years. A rising LIX from a low zone can also signal the end of euphoria — cross-check with underlying indicators.