Economy & PolicyExtended setlive in productionNew

Credit Spread Shock

Updated dailyData needs: lowlong onlyshort onlylong short

2012

#110 credit_spread_shock — Gilchrist-Zakrajsek 2012 AER BAA-10Y excess-premium proxy.

In plain terms

Watch the corporate-bond credit spread — when it compresses sharply, high-beta names rip; when it widens sharply, they get hammered. We trade the regime change.

How it works

Gilchrist-Zakrajsek 2012 AER show the excess-bond-premium component of credit spreads predicts equity returns at 1-3mo horizons with R² up to 12%. We use raw BAA-10Y (Moody's BAA corp minus 10Y Treasury) from FRED as the cheap proxy. Widening shock = risk-off pressure (short high-beta names with downtrend); sharp compression = risk-on regime (long beta names with uptrend).

Live results

0 times picked on its own · 35 times inside a blend (30 beat the stock) · updated 2026-06-06

This strategy is a frequent ingredient in blends that combine a few strategies on one stock. It has contributed to 35 such blended picks (30 of which beat simply holding the stock). Picking it on its own is only one of the ways it shows up.

How its picks scored vs. buy & hold

Each pick is graded on a recent year it was never tuned on, against simply owning the same stock

Where its edge concentrates

Share of picks in each company-size group that beat buy & hold

How often it trades

Active vs. patient. Bars on the left mean it waits for rare setups; bars on the right mean it trades often

Return vs. buy & hold

How much each pick beat or trailed simply owning the stock over the test year (extreme microcap moves trimmed)

Loading substrate evidence…

Data dependencies

Daily prices
Adjusted-close OHLCV for every US-listed ticker; primary price feed.
Fred macro
A data feed this strategy reads, refreshed on its normal schedule.

Expected edge

Reported return: R² 12% on 1mo equity returns from EBP component
Tested over: 1973-2009

Gilchrist-Zakrajsek 2012: 1mo R² up to 12% for EBP; 5-10% ann. macro-conditional spread on high-beta names.

Example tickers where this is likely to fire

NVDA TSLA HYG

Illustrative only, the signal fires based on the live data, not a fixed list.

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