MACRO REGIME MODEL
Our regime models are inspired by the works of prestigious investment funds, managers, and advisors who have contributed valuable discoveries throughout multiple areas of finance over the past four decades. We find the rates of change in growth expectations and inflation expectations to be the most important and reliable in market regime forecasting.
THE FOUR REGIMES
The reported rate of change figures at the end of each quarter (GDP and CPI) tell the story. The regimes are measured based on four different scenarios of rising and falling growth and inflation expectations:
EXPANSION
Risk-OnGrowth: Rising / Inflation: Falling
INFLATION
Risk-OnGrowth: Rising / Inflation: Rising
STAGFLATION
Risk-OffGrowth: Falling / Inflation: Rising
DEFLATION
Risk-OffGrowth: Falling / Inflation: Falling
REAL-TIME REGIME DETECTION
Relying on quarterly GDP and CPI numbers presents a challenge: the data is already outdated. Since markets act as forward-looking mechanisms, we must focus on anticipating future shifts in the cycle, not just reacting to past data.
Our approach leverages quant-level market analysis, seamlessly integrating daily data to decode prevailing market regimes. Grounded in rigorous backtesting since the 1990s, our regime catalysts deliver insights that balance historical credibility with present-day adaptability. By drawing from a vast array of inputs across sectors, indices, and economic indicators, we provide a comprehensive perspective on the market landscape — prioritizing data-driven decisions over storytelling.
RISK DYNAMICS
To simplify the framework, we categorize the four regimes into three intuitive risk dynamic zones:
RISK-ON
Growth strength > 0%Favorable environment for offensive positioning.
SLOWDOWN
Growth strength between 0% and -50%Buffer zone — both offensive and defensive strategies can perform. Technically Risk-Off, but not severe.
RISK-OFF
Growth strength < -50%Clear Risk-Off environment. Defensive positioning becomes paramount.
