A US signal, a cycle-length clock, and a system you evaluate in decades
The spread is a US macro signal, so the system belongs on broad US equity exposure. Its clock is the business cycle, which makes it the slowest system in the library to run — and to judge.
Key takeaway
- The treasury curve forecasts the US economy; applying its signal to other markets or single names is untested extrapolation
- A full evaluation needs at least one complete cycle — a decade in which the system may act meaningfully twice
- The monthly half hour is real but the harder commitment is patience measured in years of nothing happening
What to run it on
| Instrument | Fit | Why |
|---|---|---|
| Broad US index ETFs | Excellent | The signal forecasts the US economy, and a broad index is the closest tradeable expression of it |
| US sector funds | Workable | Cyclical sectors respond to the same recessions, but each adds sector noise the signal knows nothing about |
| Foreign equity indices | Poor | The US curve is not a forecast of Europe or Japan; their cycles have their own curves, and the mapping is untested |
| Single stocks | Poor | A company can halve for reasons no macro series anticipates; the filter offers false comfort at the single-name level |
The system's clock is the business cycle
Most systems in this library cycle in days or months. This one cycles with the economy: years of the curve comfortably positive and the system fully invested and silent, then an inversion, a long defensive stretch, and a re-entry. A reasonable expectation is one or two meaningful decisions per decade.
That pace has an underappreciated consequence: you cannot learn this system by running it. Ten years of live experience is a sample of about two signals. The evidence for the method has to come from the long record, because your own experience will never accumulate enough of it.
Half an hour a month, most of it restraint
- Once a month, read the 10y−2y spread — one chart, one sign.
- Check the index's close against its 200-day average.
- Apply the three rules. Almost every month, they say 'no change'.
- Write down the state and the date, and stop.
These are documented methods described for study. Nothing here is investment advice, a recommendation, or a claim about future returns — every system on this page has losing periods, and the pages say where.
Reading about a system is not having one.
Plutux is where you write your own rules down, test them against real data, and keep the record your memory would otherwise rewrite. Join the waitlist for early access.