Our research section is driven by the ETFFI Ten Spot Model. The10 Spot Model operates by combining security specific signals and a macro framework that classifies the market into six regimes using five primary regime indicators, then uses four additional positioning indicators to refine ETF allocations. Balanced Income is the sixth regime, but it does not have a separate indicator. The indicators combine credit spreads, Treasury yields, inflation expectations, volatility, market breadth, and asset-price trends. This description is here as a resource to help our investors gain insights from our research studies.
NOTE: Exact transformations, factor weights, confirmation rules, thresholds, and regime-selection hierarchy are proprietary.
| Regime | What It Signals | Data Series Included | General Portfolio Bias |
| Risk-On Credit | Credit conditions are supportive and investors are being rewarded for accepting spread risk. | High-yield OAS; investment-grade OAS; recent changes in both spreads; S&P 500 return; advancing-versus-declining volume; HYG momentum. | Favors high yield, investment-grade credit, emerging-market debt and floating-rate credit. Reduces defensive cash exposure. |
| Defensive Cash | Market stress, weak breadth or elevated volatility favors liquidity and capital preservation. | High-yield and investment-grade OAS relative to history; MOVE Index relative to history; advancing-versus-declining volume; S&P 500 trend. | Favors SGOV and SHY. Reduces high yield, emerging-market debt and dividend-equity exposure. |
| Duration Rally | Falling yields and improving bond-market trends support interest-rate exposure. | Change in the 10-year Treasury yield; change in the 10-year real yield; MOVE Index; TLT momentum. | Favors long Treasuries, investment-grade bonds and municipal bonds. Reduces floating-rate exposure. |
| Inflation Hedge | Inflation expectations and inflation-sensitive assets are strengthening. | Change in the 10-year breakeven inflation rate; gold return; WTI crude-oil return; change in the 10-year real yield; TIP momentum. | Favors TIPS, with smaller potential allocations to floating-rate and real-asset-related income exposures. |
| Equity Breadth | Risk appetite is broadening beyond a narrow group of market leaders. | Advancing-versus-declining S&P 500 volume; S&P 500 return; change in the S&P 500 advance-decline line; SCHD momentum. | Favors dividend equities and selected credit-risk sleeves, including high yield and emerging-market debt. |
| Balanced Income | No primary regime has sufficient confirmation to justify a concentrated active tilt. | No separate indicator. This is the model’s residual regime when the other primary signals do not qualify under the proprietary decision rules. | Maintains diversified policy allocations with limited or no active overlay. |
Indicator Measurement Framework
The model evaluates several forms of market evidence:
- Relative levels: Credit spreads and MOVE are compared with their historical ranges.
- Recent changes: Credit spreads, Treasury yields, real yields, breakevens and the equity advance-decline line are evaluated over intermediate horizons.
- Medium-term returns: The S&P 500, gold, WTI crude and currency markets provide cross-asset confirmation.
- Longer-term momentum: TLT, HYG, TIP and SCHD help confirm whether the relevant market trend is established.
- Breadth confirmation: Advancing and declining market volume tests whether risk appetite is broad or narrowly concentrated.
Positioning Indicators
After identifying the primary regime, the model uses four additional indicators to refine ETF allocations:
| Positioning Indicator | Data Series Included | Primary Use |
| Floating Rate | Three-month Treasury-bill yield relative to the 10-year Treasury yield; Credit Indicator; Duration Indicator; BKLN momentum. | Determines whether floating-rate loans are preferable to fixed-rate duration. |
| Emerging Markets | Credit Indicator; change in the U.S. dollar versus the euro; EMB momentum. | Evaluates the backdrop for emerging-market sovereign debt. |
| Municipal Bonds | Duration Indicator; Defensive Indicator; MUB momentum. | Evaluates the relative appeal of the municipal-bond sleeve. |
| Dividend Income | Breadth Indicator; Inflation Indicator; SCHD momentum. | Evaluates the model’s dividend-equity and real-assets proxy. |
How the Framework Is Used
The regime call establishes the broad market environment. Separate confirmation and trading filters determine whether the portfolio:
- Remains near its long-term policy weights.
- Implements a partial active tilt.
- Applies the full active positioning signal.
A regime change therefore does not automatically produce a full portfolio rebalance. The model also considers signal confidence, market confirmation, the size of the proposed allocation change, turnover controls and the length of time since the previous trade.
Methodology Note: The ETFFI Macro & Credit Regime Framework uses proprietary data transformations, scoring weights, thresholds, confirmation tests and implementation rules. The disclosed series explain the economic foundation of each indicator but are not sufficient to reproduce the model.
Disclaimer: This material is provided for informational and research purposes only and does not constitute investment advice or a recommendation to buy or sell any security. Model classifications may change as market data evolves. Historical relationships and model signals do not guarantee future results.
