The economy is at the trough of the recession. Bonds are the first asset to bottom out and lead the macroeconomic recovery.
1. S&P 500 — Business Cycle Stage Timeline (FRED Macro Model)
The timeline chart maps the S&P 500 against the 6-stage Pring-Turner economic cycle calculated from Federal Reserve macroeconomic data. Vertical colored bands illustrate the historical transitions across all six cyclical phases: Stage 1: Recession Trough (Blue), Stage 2: Early Expansion (Green), Stage 3: Full Growth (Yellow), Stage 4: Late Cycle / Inflation Peak (Orange), Stage 5: Late Deceleration (Red), and Stage 6: Recession (Purple).
2. Key Macro Drivers from the St. Louis Federal Reserve (FRED)
Unlike subjective survey data, this model is mathematically derived from high-frequency macroeconomic series published by the Federal Reserve:
- Yield Curve Slope (DGS10 - DGS2): Measures banking lending profitability and recession probabilities. Inversions precede recessions; un-inversions signal transition to early recovery.
- Corporate Credit Spread (BAA - AAA): Direct gauge of balance sheet stress and corporate default premiums. Widening spreads indicate deteriorating liquidity and late-cycle fragility.
- Headline CPI Inflation & Monetary Policy: Identifies whether central banks are in aggressive tightening, neutral calibration, or crisis rate-cutting mode.
