Master Cycles

The Master Cycle model overlays 12 independent economic and market cycles into a single composite score. When multiple cycles align in the same direction, the signal is stronger. When cycles diverge, the market is in transition.

The Cycle Hierarchy

Long-term cycles (5-15 years) set the structural backdrop:

• Credit Cycle (15%) — HY/IG spreads, financial conditions, bank lending standards. Credit expansion fuels booms; contraction triggers crises.
• Housing Cycle (10%) — Full cascade from rates to permits to prices. Uses the dedicated Housing Cycle model.

Mid-term cycles (1-5 years) drive the business environment:

• Business Cycle (15%) — Industrial production, payrolls, unemployment, durable goods orders.
• Earnings Cycle (8%) — Corporate profits after tax. Peaks lag the business cycle.
• Commodity Cycle (7%) — Oil, copper, natural gas. Reflects global demand.
• Inflation Cycle (5%) — CPI YoY + breakeven expectations.
• Inventory Cycle (5%) — Inventories/sales ratio (inverted). Low inventory = bullish.

Short-term cycles (0-2 years) determine immediate market conditions:

• Liquidity Cycle (12%) — Fed balance sheet minus reverse repo minus TGA plus M2.
• Monetary Policy (8%) — Yield curve slope + Fed Funds rate (inverted).
• Volatility Cycle (5%) — VIX (inverted). Low volatility = bullish.
• Dollar Cycle (5%) — Trade-weighted dollar (inverted). Weak dollar = bullish for risk.
• Sentiment (5%) — Market fear/greed indicators.

Composite Score & Regime

Each cycle is transformed into a 0-100 Strength Indicator, then combined using dynamic weights (only available cycles contribute). The composite determines the macro regime:

• Risk-On (>= 70): Multiple cycles aligned bullish
• Bullish (55-70): Favorable conditions, some divergence
• Neutral (45-55): Mixed signals, transition
• Risk-Off (30-45): Multiple cycles deteriorating
• Crisis (< 30): Most cycles aligned bearish

Data Sources: FRED (Federal Reserve Economic Data — Public Domain). All cycle scores are proprietary calculations using Ehlers Super Smoother strength indicators.