The Test Bench › gate
Does Net Liquidity (Fed B/S − RRP) actually work?
DEADNo edge left once tested on a fair footing.
The claim
A macro / intermarket reading that times the market — Macro / FinTwit thesis
What we did
Tested against Buy & hold SPY, same window (2012+), 2012-2026, both directions, vs +0.33 null floor.
The result
Result: -0.12 dSharpe (vs buy-hold)
dSharpe -0.12 as a daily SPY gate; below the data-mining floor (+0.33)
Verdict
The famous 'net liquidity drives the S&P' thesis is a DUD as a daily timing gate -- noise both directions. (Proxy = WALCL minus reverse-repo, missing the TGA leg we don't have; the classic form is weekly. But the popular daily version people trade on doesn't hold up.)
What the test did and did not do
- tested out of sample
- point-in-time data
- checked for look-ahead
- net of real costs
Almost nobody publishing a backtest says which of these they did. We list the ones we failed as well as the ones we passed.
Tested 2026-06-23. The same treatment, applied to every other system, is on the test bench.
Written with AI assistance from our own test database. The numbers are computed, not composed.
General market commentary for education, not personalised investment advice. Backtested results are hypothetical. Trading carries a real risk of loss.