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< BACK TO ALL REPORTS

The Combined Credit Spread Model Falls to Unfavorable - Part II

Jay Kaeppel
2026-03-23
Our Combined Credit Spreads Model recently fell to an unfavorable status. Herein, we examine past unfavorable periods to get an idea of what to expect in the near term.

Key points:

  • Credit spreads measure the difference in yield between a higher quality issue and a lower quality issue
  • Rising credit spreads signify risk-off behavior among very large and sophisticated investors
  • The Combined Credit Spreads Model recently fell into unfavorable status - suggesting limited upside for stocks while this status remains

The Combined Credit Spread Model

In Part I, we detailed the components that comprise our Combined Credit Spreads Model and why they matter. The model recently fell into unfavorable territory. In Part II, we will take a closer look at S&P 500 performance during previous instances.

In the chart below, a green arrow marks the beginning of an unfavorable period. This happens when the Model drops to 0. The subsequent red arrow indicates the end of a given unfavorable period. The most recent signal occurred the week ending March 13th.

The table below summarizes the S&P 500's performance during unfavorable periods. Key things to note:

  • The model has been unfavorable 16.2% of the time (the rest of the time it is favorable for stocks)
  • The Win Rate in

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Risk Disclosure: The information and tools provided are for research and analytical purposes only and are not intended as investment advice. Market analysis involves uncertainty, and outcomes may differ from expectations. Users should conduct their own due diligence and consider their individual circumstances before making any financial decisions. Past performance is not necessarily indicative of future results.

Hypothetical Performance Disclosure: Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown; in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. for example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all which can adversely affect trading results.

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