Market conditions

What the number is

A single 0–1 score summarising market conditions associated with credit-cycle stress — an experimental index, not a measurement of every private balance-sheet exposure. It combines four families of public market driver: the term structure of interest rates, a credit spread, equity volatility, and an equity valuation level. Higher means a higher combined market-conditions score under this method — not a higher probability of any event, and not a reading of the debt-service, refinancing, contagion, external or fiscal buffers dimensions named above, which this index does not feed and do not feed it. It does not directly observe household debt service, corporate refinancing needs, cash buffers or bank positions; those belong to separate, separately named models.

The model recomputes the score daily and publishes it to cloud storage; this page reads that published copy (with a baked fallback that is labelled when stale). The inputs have different cadences: the market legs publish daily, usually a day or two apart, while the valuation leg is an annual curated value held constant through the year — so a daily publication is not four daily observations. Daily movement enters only through quarter-to-date driver means — a single day cannot swing the reading on its own, which is why the line is smooth and why a still-open quarter is marked provisional.

The yield-curve input is the 10-year Treasury yield minus the 2-year yield. See the rates, their spread and the market index together in our yield-curve guide.

What the regimes mean

The four regime names are bands of the combined score, not a count of stretched legs — a weighted composite does not enforce a fixed number of drivers being stretched at any given band. Elevated is the one precisely defined boundary: the reading is above 0.40, the sealed tripwire's own public criterion. Benign, Watch and Fragile are authored categories on either side of it: the thresholds were chosen by this model's authors, and crossing one is a statement about the combined index, not a calibrated probability of any event and not a tally of how many of the four inputs are individually stretched.

What it is not

It is not a market call, not a recession probability, not a timing signal, and not a demonstrated forecasting record. It is model-conditional: it says what this model reads from these drivers. Its retrospective record on credit-cycle drawdowns is mixed (stated above), and it says nothing about exogenous shocks — a war, a pandemic, a policy accident — that arrive from outside its market drivers.

Why the US line is different

The US reading is the sealed instrument: all four legs are the United States' own published series — three at daily frequency, the valuation leg an annual curated value — and the same instrument stands behind a sealed, dated, scoreable prediction in the ledger. When it is wrong, it will be scored in public like any other entry. Sealing makes the record checkable; it does not, by itself, make the model right.

Why the other lines are approximate

No other economy has four keyless daily drivers of its own. The comparison lines fill the gaps with declared proxies — a regional credit spread instead of a national one, a global volatility index, market capitalisation over GDP as the valuation leg, normalised against that country's own history. Each substitution is listed on the country card on the home page.

That makes each of them useful for watching its own economy's direction of travel. It does not make them the same instrument as the US index, and it does not support ranking economies against each other — the same numeric value need not represent the same exposure in two countries. They are approximate: not sealed, not scored, and never published as predictions.