Market Compass · updated 22 Oct 2026 after close
Where the market is heading.
Interest rates, inflation expectations, oil, the dollar and sector momentum, turned into one picture of which sectors have the wind behind them, which are fading, and when conditions call for caution.
Economic regime
Reflation
Since Apr 2026Confidence: Medium
Inflation risingInflation falling
Stagflation riskGrowth ↓ · Inflation ↑Energy and defensives have held up best
NowReflationGrowth ↑ · Inflation ↑Cyclicals, energy and financials have led
SlowdownGrowth ↓ · Inflation ↓Defensives and quality have held up best
GoldilocksGrowth ↑ · Inflation ↓Growth and technology have led
← Growth slowingGrowth rising →
Growth and inflation are market-based proxies (cyclical against defensive sectors, credit appetite and 10-year breakeven inflation); official CPI and industrial-production data will replace them when connected. The hints describe past tendencies, not forecasts.
Market conditions
Risk-on
0 of 6 stress signals are on. Seven are tracked; Yield curve has no reading today and is not counted. Few warning lights are flashing.
Risk-onNeutralCautiousDefensive
3-month T-bill yield
4.22%
▲ rising
10-year yield
4.96%
▲ rising
Inflation expectations (10Y breakeven)
2.32%
● steady
Oil (USO ETF, 3 months)
+18.9%
▲ rising
Yield curve 10Y–2Y
+31 bp
● steady
Credit (HYG vs Treasuries, 3m)
-0.3%
▲ widening
Volatility (VIX)
19.0
● normal
Breadth (stocks above 200-day)
60%
● healthy
Dials, themes and sector outlook as of 22 Oct 2026.
Sector outlook
Outlook = regime history + macro sensitivity + momentum + valuation (news pulse not available yet)| Sector | Outlook | In this regime (history) | Momentum (3M vs market) | Valuation | Trend |
|---|---|---|---|---|---|
| Energy | Favourable 88 | +1.0% | −68.9% | Below avg. | Mixed |
| Information Technology | Favourable 75 | +2.0% | −69.4% | Above avg. | Weakening |
| Communication Services | Favourable 73 | +1.3% | −74.9% | Below avg. | Weakening |
| Financials | Favourable 71 | +1.0% | −73.5% | Below avg. | Mixed |
| Consumer Discretionary | Neutral 51 | +0.5% | −72.3% | Average | Mixed |
| Health Care | Neutral 51 | −0.4% | −61.2% | Above avg. | Mixed |
| Materials | Neutral 48 | −1.9% | −71.3% | Average | Mixed |
| Consumer Staples | Neutral 47 | −3.2% | −66.7% | Average | Mixed |
| Industrials | Neutral 38 | −0.0% | −76.9% | Above avg. | Mixed |
| Real Estate | Unfavourable 32 | −1.5% | −81.5% | Below avg. | Mixed |
| Utilities | Unfavourable 27 | −2.1% | −79.2% | Average | Mixed |
"In this regime" = average 3-month return against the equal-weight market in past months that had the same growth/inflation regime, across the stocks we cover today (so it carries survivorship bias). Momentum is the sector's 3-month return minus the S&P 500's.
What if…? Scenario explorer
Pick an event to see how each sector and asset class has historically reacted to similar moves.
Sector reaction (historical sensitivity)
Other assets
Estimated from monthly returns since 2008 with a multi-factor regression (market, oil, 10-year yield, dollar, credit). Large shocks are scaled from small monthly moves, and history does not repeat exactly.
Stocks aligned with today's outlook
From sectors with a favourable outlook, filtered for X-Ray Score ≥ 65 and not overvalued. A starting point for research: open each X-Ray before deciding anything.
MU79
Micron Technology Inc · Information TechnologyFair · fair value $982ADBE77
Adobe Inc. · Information TechnologyUndervalued · fair value $390SNDK73
Sandisk Corp · Information TechnologyFair · fair value $1,201APP72
AppLovin Corp · Communication ServicesFair · fair value $308INTU71
Intuit Inc. · Information TechnologyFair · fair value $415FICO71
Fair Isaac Corp · Information TechnologyUndervalued · fair value $984What changed since last week
●No signal changed in the past week; the gauge stays at Risk-on (0 signals on).
A weekly written brief is not available yet; this list is generated from the data.
Signals on, last 12 months
0 to 6 signals, daily. Past days count at most six of the seven: the earnings signal is only computed for the latest day.
How the risk gauge is built: the seven signals
| Signal | Rule | Reading | State | Since |
|---|---|---|---|---|
| Trend | S&P 500 below its 200-day average | 7,663 | off | 8 Apr 2026 |
| Breadth | Fewer than 40% of stocks above their own 200-day average | 60% above | off | 12 Aug 2025 |
| Volatility | VIX above its trailing 1-year 80th percentile | 19.0 | off | 19 Oct 2026 |
| Credit stress (proxy) | High-yield bonds (HYG) down more than 3% against Treasuries (IEF) over 3 months | -0.3% | off | 12 Aug 2025 |
| Yield curve | 10-year minus 2-year Treasury yield below zero (inverted) | – | n/a | – |
| Energy shock (proxy) | Oil ETF (USO) up more than 30% over 3 months | +18.9% | off | 9 Oct 2026 |
| Earnings | Aggregate trailing net income of the stocks we cover lower than a year earlier | +35.5% | off | 22 Oct 2026 |
An eighth signal, the OECD leading indicator falling three months in a row, is specified but its data is not connected yet. It is not part of the gauge or of the count above.
Market Compass describes conditions and historical patterns using public data. It is educational research, not a forecast, a recommendation to buy or sell, or personal financial advice. Markets can behave differently from history.