Research / Theme
Market Regimes & Structural Cycles
Markets do not behave continuously. They move through regimes defined by underlying economic conditions, liquidity, inflation dynamics, and policy responses.
Many investment frameworks implicitly assume stability — treating markets as environments where historical relationships persist. In practice, regime shifts alter correlations, invalidate assumptions, and change the behavior of assets simultaneously.
The most damaging portfolio losses often occur not because a position was poorly selected, but because the environment in which it was designed no longer exists. A strategy that performed well in expansion can destroy capital in contraction — not because it was wrong, but because it was right for the wrong regime.
This research theme examines how market regimes form, transition, and interact with portfolio structure. It focuses on identifying when diversification fails, when historical data becomes misleading, and when risk migrates across asset classes rather than disappearing.
MARY's Macro Intelligence agent operationalizes regime detection using 21 FRED leading indicators — yield curve, credit spreads, initial claims, breakeven inflation, financial conditions — z-score normalized with hysteresis buffers to prevent false regime signals. The system classifies across four states (expansion, slowdown, contraction, recovery) and updates continuously as data arrives. Every other agent in the system — portfolio construction, fundamental analysis, strategy selection — receives the current regime classification as context. Regime awareness is not an add-on; it is the foundation.