2011–2026
S&P sector behavior from September 2011 through March 2026.
LOGIC Macro Regime Back-Test
Most portfolios are built for markets that keep rewarding risk. This page shows what the historical data looks like when you separate the environment into Risk-On and Risk-Off instead of averaging everything together.
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Historical tendencies only. Not investment advice and not a guarantee of future results.
What the back-test is showing
FRAMEWORK≥ 4
Months classified as Risk-On when the Risk Bias Score is 4 or higher.
≤ 3
Months classified as Risk-Off when the Risk Bias Score is 3 or lower.
Why this matters
SUMMARYThe point is not to call every market move. The point is to avoid owning a portfolio that is mismatched with the environment. In Risk-On periods, broad equity exposure and cyclicals are generally rewarded. In Risk-Off periods, returns usually slow, volatility rises, and portfolios often become far less efficient.
That is the key takeaway from the back-test. For the S&P 500, average monthly return drops from 1.5% in Risk-On to 0.8% in Risk-Off, while volatility rises from 3.7% to 4.7%. Return per unit of risk falls from 0.41 to 0.17. The damage is not always a crash. Often it is prolonged undercompensated risk.
The sectors that tend to hold up best in Risk-Off are the defensive core: Healthcare, Consumer Staples, and Utilities, with Energy as the notable exception when the stress is driven by supply-side shocks. By contrast, Technology, Consumer Discretionary, Industrials, and Materials tend to see a much larger deterioration in efficiency when the risk bias turns.
What tends to hold up vs. fade
POSITIONINGWhen the backdrop is Risk-On
- Broader equity beta is generally rewarded.
- Technology and Consumer Discretionary tend to lead.
- Cyclicals usually carry stronger return/risk profiles.
- Aggressive positioning is more likely to be paid for.
When the backdrop is Risk-Off
- Portfolio efficiency becomes more important than chasing upside.
- Healthcare, Staples, and Utilities tend to provide a ballast.
- Energy can still work when inflation or supply shocks drive the stress.
- Cyclicals often stop compensating investors for the risk taken.
Risk Bias Score sector back-test
DATAAverage monthly total return, volatility, and return/risk ratio
This table shows how major S&P sectors (ETF ticker tested) performed.
What tends to outperform / underperform in each Macro Regime?
STYLE FACTORS & SECTORSBelow is a list of how major equity style factors, sectors and fixed income categories have tended to behave in each LOGIC Macro Regime. Historical tendencies only – not a guarantee of future results and not investment advice.
GOLDILOCKS
Top Equity Style Factors
- High Beta
- Small Caps
- Mega Cap Growth
- Cyclicals
- Mid Caps
Bottom Equity Style Factors
- Low Beta
- Defensives
- Size
- Quality
- Dividends
Top Equity Sectors
- Consumer Discretionary
- Financials
- Technology
- Materials
- Industrials
Bottom Equity Sectors
- Utilities
- Communication Services
- Real Estate
- Consumer Staples
- Health Care
Top Fixed Income Sectors
- Business Development Co. Loans
- Convertibles
- High Yield Credit
- Emerging Markets $ Debt
- Preferreds
Bottom Fixed Income Sectors
- Long Duration Bonds 10yr+
- 0–5yr TIPS
- Mid Duration Bonds 2-10yr
- Mortgage Backed Securities
- 5–10yr TIPS
REFLATION
Top Equity Style Factors
- Mega Cap Growth
- High Beta
- Cyclicals
- Momentum
- Small Caps
Bottom Equity Style Factors
- Low Beta
- Dividends
- Defensives
- Quality
- Large Caps
Top Equity Sectors
- Technology
- Industrials
- Consumer Discretionary
- Financials
- Energy
Bottom Equity Sectors
- Real Estate
- Consumer Staples
- Utilities
- Communication Services
- Health Care
Top Fixed Income Sectors
- Business Development Co. Loans
- Convertibles
- Preferreds
- High Yield Credit
- Emerging Markets Local Currency
Bottom Fixed Income Sectors
- Long Duration Bonds 10yr+
- Mid Duration Bonds 2-10yr
- Investment Grade Credit
- Mortgage Backed Securities
- Short Rates
INFLATION
Top Equity Style Factors
- Low Beta
- Mega Cap Growth
- Quality
- Dividends
- Defensives
Bottom Equity Style Factors
- High Beta
- Small Caps
- Cyclicals
- Value
- Mid Caps
Top Equity Sectors
- Utilities
- Health Care
- Real Estate
- Consumer Staples
- Communication Services
Bottom Equity Sectors
- Energy
- Materials
- Financials
- Industrials
- Consumer Discretionary
Top Fixed Income Sectors
- Long Duration Bonds 10yr+
- Emerging Markets $ Debt
- 5–10yr TIPS
- Mid Duration Bonds 2-10yr
- Investment Grade Credit
Bottom Fixed Income Sectors
- Business Development Co. Loans
- Convertibles
- High Yield Credit
- Mortgage Backed Securities
- Leveraged Loans
DEFLATION
Top Equity Style Factors
- Dividends
- Low Beta
- Quality
- Defensives
- Growth
Bottom Equity Style Factors
- High Beta
- Cyclicals
- Value
- Small Caps
- Mid Caps
Top Equity Sectors
- Real Estate
- Health Care
- Consumer Staples
- Utilities
- Consumer Discretionary
Bottom Equity Sectors
- Financials
- Industrials
- Technology
- Communication Services
- Energy
Top Fixed Income Sectors
- Long Duration Bonds 10yr+
- Mid Duration Bonds 2-10yr
- Investment Grade Credit
- Mortgage Backed Securities
- Short Rates
Bottom Fixed Income Sectors
- Preferreds
- Business Development Co. Loans
- Leveraged Loans
- High Yield Credit
- Emerging Markets Local Currency
Bottom line
TAKEAWAYInvestors usually spend too much time trying to pick the right asset and not enough time asking whether that asset fits the regime. The bigger source of underperformance is often not being wrong on a stock. It is being wrong on the environment.
See the LOGIC Macro Regime and Risk Bias Score in advance
The Monthly Macro Map is designed to classify the environment ahead of time so you can stay invested with exposures that better match the Macro Regime and Risk Bias instead of reacting after the fact.