Correction Signal Activated - Indicates Pervasive Risk-Off Behavior | Research

VP’s Correction Signal is now active. The average 30-60 day forward return is negative, while the median is around flat. The 20th to 80th percentile distribution also shows a large negative skew to future returns.
The signal does not work all the time, but when it does work, the sell-off can be surprisingly large.
In terms of the wider macro context, the growth leading indicator outlook is becoming more benign, but it would be remiss if we didn’t point out one of our most reliable risk-off tactical models. For now, we would interpret the correction signal activation as warning of a 10% correction, rather than anything more sinister.