Market Regime Indicator
Growth and inflation framework after Ray Dalio's macro regime model: the current US regime from live data, and which assets have done best in it.
GDPC1)tanh((GDP − 2) / 4)CPIAUCSL)tanh((CPI − 2.5) / 3)| Data | Series | Provider |
|---|---|---|
| S&P 500 total return | Daily total-return index (^SP500TR) from January 1988 | Yahoo Finance |
| Financial conditions | NFCI, monthly average | Federal Reserve Bank of Chicago via FRED |
| Cash | 3-month Treasury bills | FRED |
Rule: 100% in the S&P 500 with dividends reinvested when the NFCI averaged 0 or below in the month before each quarter, otherwise 100% in 3-month T-bills. After tax assumes a taxable account: 15% on dividends and on gains held over a year, 24% on shorter gains and on T-bill interest, losses carried forward, no state tax, everything sold at the end. The NFCI’s past values are revised as new data arrives, so the backtest uses today’s version of the index.
About this tool
This market regime indicator classifies the US economy with the framework popularized by Ray Dalio: GDP growth above/below 2% crossed with CPI inflation above/below 2.5% gives four regimes, and each has historically favored different assets. It runs on live GDP and CPI data from FRED, not opinion, and a second method on the page reads financial conditions and inflation expectations for a faster signal.
The point is not prediction but preparation. Stocks carried the 2010s because the regime was disinflationary growth; commodities and TIPS carried 2021-22 when inflation took over. Knowing which regime you are in, and what tends to work in it, is a sturdier starting point than extrapolating whatever just worked.
US Economic Regime pairs with Recession Risk, which shows a heuristic recession risk score, and Crash Risk, which measures how fragile the stock market is.
What is a market regime indicator?
A tool that labels the current economic backdrop so you can see which assets have tended to do well in it. This one uses the levels of growth and inflation, the two forces that move stocks, bonds and commodities most.
What are the four economic regimes?
Goldilocks: GDP above 2%, CPI below 2.5%. Reflation: both above. Deflation: both below. Stagflation: GDP below 2%, CPI above 2.5%. These labels describe threshold levels, not acceleration.
Which assets work in stagflation?
Historically commodities, gold and inflation-protected bonds. Both stocks and nominal bonds tend to struggle when growth slows while prices keep rising, which is what made the 1970s so painful for the classic portfolio.
How is the current regime detected?
From real GDP year-over-year growth relative to 2% and CPI year-over-year inflation relative to 2.5%, published through FRED. GDP is quarterly, so the regime can lag turning points by a few months.
Does the regime tell me if a recession is coming?
Not directly. Falling growth is a warning sign, but the timing and odds of a recession are what Recession Risk is built for, using leading signals such as the yield curve and the Sahm rule.