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Market Regime

In short

Classification of the current market environment — bull, bear, high-vol, neutral, etc.

Markets behave differently in different regimes. A bull regime rewards growth and risk; a bear regime rewards defensives and cash; high-volatility regimes punish leverage. We combine VIX, the 10Y–2Y yield spread, and credit spreads to classify the current regime so you can size positions and pick strategies accordingly.

Regime detection uses multi-signal classification: CRISIS → BEAR → HIGH_VOL → CORRECTION → RECOVERY → BULL → LOW_VOL → NEUTRAL. Inputs: VIX (fear index), 10Y–2Y Treasury spread (inversion = recession risk), IG/HY credit spreads (funding stress), rolling 10-day volatility. Each regime has a recommended allocation tilt — strategies in this app are tagged by which regimes they tend to outperform in.

Thresholds

BULL / LOW_VOL
Risk-on — growth and beta favoured
NEUTRAL / RECOVERY
Balanced positioning
CORRECTION / HIGH_VOL
Reduce leverage, tighten stops
BEAR / CRISIS
Defensive — cash, quality, hedges

Related concepts

  • VIX (Volatility Index) — VIX is called the 'fear gauge.' When investors are scared, they buy options to protect themselves, which pushes VIX up. VIX above 30 means real fear in the market. Below 15 means complacency. Extreme fear is often a contrarian buy signal.
  • Yield Curve — Normally, long-term bonds yield more than short-term ones (upward sloping). When short-term yields exceed long-term (inverted curve), it's historically predicted every US recession in the past 50 years. Investors call this the most reliable recession indicator.
  • Market Indices — An index tracks a group of stocks to gauge how a market or sector is doing. The S&P 500 (^GSPC) tracks 500 large US companies, NASDAQ-100 (^NDX) tracks 100 big tech/growth names, Dow (^DJI) tracks 30 blue chips, Russell 2000 (^RUT) tracks 2,000 small caps. Index ≠ ETF — ETFs like SPY are investable proxies, but the index is the underlying reference.
  • Maximum Drawdown — If your portfolio hit $10,000 then fell to $6,000 before recovering, the max drawdown is 40%. It measures the worst experience a real investor would have endured.