Glossary / Macro & regime

Market regime

A market regime is a broad classification of prevailing market conditions into a small set of named states — risk-on and risk-off being the most common pair, sometimes with a neutral state between them. It is a label imposed on continuous conditions, not a measured quantity.

How it is measured

Regime classifications are built by combining market-wide inputs — an expected-volatility index, benchmark trend, participation breadth, interest-rate direction, currency strength — and resolving them into a state. Because the boundaries between states are chosen rather than derived, the classification steps discretely when an underlying reading crosses a threshold, which can happen on a small move.

Why it matters

A regime label is context: the same reading on an individual security occurs in very different market conditions, and knowing which conditions prevail is what keeps a broad market move from being mistaken for something specific to one name. The limitation to hold onto is that regimes are identified once they are already under way. A classification describes conditions that have been observed, and none of the common approaches forecasts a change of state.

In Market Census

Market Census's market-mood check looks at the market's overall mood. It is the same for every stock at the same moment.

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Related terms

VIX
The VIX is an index of the volatility expected over the next 30 days in the S&P 500, derived from the prices of that index's options.
Market breadth
Market breadth measures how widely a market move is shared across the securities in it, rather than how far the index itself has travelled.
Yield curve
The yield curve plots the yields on government bonds of the same issuer against their time to maturity.
Sector rotation
Sector rotation describes a shift in which parts of the market are moving most, as capital concentrates in some sectors and thins out of others over weeks or months.

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General information about market vocabulary, written to be descriptive rather than prescriptive. Not investment advice — see the risk disclosure.