Dynamic Macro Swapping: Adapting to Treasury Yields and the VIX

Regime-Aware Factor Investing

Static quantitative screens fail when macroeconomic regimes shift. A value-heavy portfolio that outperforms during a recession will inevitably lag during a liquidity-driven bull market. Institutional quant desks solve this using Macro Swapping.

How the Engine Interprets the Macro Environment

Before our engine runs a single stock screen, it reads the broader macroeconomic tape using two primary sensors:

• 10-Year Treasury Yield (^TNX): Represents the risk-free rate and discount factor.
• CBOE Volatility Index (^VIX): Measures market fear and near-term instability.

The Three Algorithmic Regimes

1. Risk-Off (VIX > 25): The algorithm aggressively pivots to Quality and Value. Momentum is mathematically discarded. We seek robust balance sheets and massive WACC spreads.
2. High Rates (10Y > 4.5%): The algorithm penalizes growth traps. Value takes a heavy weighting (60%+) as long-duration equities are re-rated downward.
3. Neutral / Bull (VIX < 20, 10Y < 4.0%): The engine unlocks Momentum factors, allowing the portfolio to chase high-velocity growth names while maintaining a minimum Quality baseline.