Reading the macro regime: how five indicators vote risk-on or risk-off
10 August 2026 · 6 min read
Most “market regime” indicators are opaque: a proprietary score comes out, and you're asked to trust it. We built ours the other way around – five independent, publicly-sourced indicators, each with a published threshold, each casting one vote. Add them up, and you get a transparent read on whether the macro backdrop favours risk-taking or caution.
The five voters
The yield curve (10-year minus 2-year Treasury spread) votes risk-off when it inverts – a historically reliable, if noisy, recession signal. The 10-year minus 3-month spread does the same job over a shorter horizon and often moves first. The VIX votes risk-off above a fear threshold and risk-on when it's unusually calm. High-yield credit spreads widen when the market is pricing in more default risk, which votes risk-off; tightening spreads vote the other way. And the unemployment rate's trend – not its level – casts the fifth vote, since a stable-but-elevated unemployment rate says something different than one that's rising fast.
Why voting, not a weighted average
A weighted composite score invites a design choice – how much should each indicator matter? – that's easy to get wrong and hard to audit. A vote is binary and legible: each indicator says risk-on, neutral, or risk-off, based on a threshold anyone can look up and check against the raw data themselves. When the votes sum to a strong enough net score in either direction, we call the regime; otherwise, it's neutral. There's no fitting to history here, which is deliberate – a model tuned to explain the past is exactly the kind of thing that quietly stops working the moment the future looks different from the sample it was trained on.
What it isn't
This is a classification of the current macro backdrop, not a forecast, and never a signal to act on by itself. It doesn't know about a single company's fundamentals, a single stock's valuation, or your own portfolio's exposure. It's one input among many a careful reader would weigh – and it's context, not conviction: a risk-off reading doesn't mean “sell,” and a risk-on reading doesn't mean “buy.”
Where it shows up
The regime read feeds into the broader research toolkit as context, alongside factor rankings and portfolio construction views – never as a standalone recommendation. Like everything else on this platform, it's disclosed, sourced, and never dressed up as advice.
Educational content only – not investment advice or a recommendation to trade. Nothing here estimates or implies future returns.