What if a wave of ARM resets delivers a payment shock?
Direct chain: a hawkish path resets ARMs sharply higher, spiking delinquencies among stretched recent buyers and widening mortgage-credit spreads — financials and HY lead. Rhymes with the 2006-07 ARM-reset wave that front-ran subprime defaults. But post-2009 the US stock is ~95% fixed-rate, so the at-risk pool is a fraction of 2007 — the impulse is real but smaller; the roots (fed 0.9, credit 0.6) are reasonable for the trigger.
how we built this number — every step
The class rate is measured from our dated, sourced event library (decade-normalized Poisson — the full table is public at base_rates.json). The variant’s share within its class is the analyst’s editorial call, published so you can audit it. A wider range means thinner precedent. Full recipe: methodology · scored at Reality Check.
The butterfly cascade
How this trigger trickles across markets, left → right — the root shock, its first‑order moves, then the ripple effects. Drag any node; tap a market for its real price history.
Resolution timeline — how this probability is moving
Our model's odds (gold) over time vs the crowd's (Polymarket, blue), from the past toward the 6–18 months horizon. Each dot is a real macro event that nudged the probability — green pushed it up, red pushed it down. Tap a dot for the source. The gold path is an illustrative reconstruction anchored to today's estimate — real dated events, not a live re-estimate history.
What it would mean
If this plays out, it is a risk-off shock. A wave of adjustable-rate mortgages resets sharply higher, spiking delinquencies among stretched recent buyers. The trigger decomposes into signed root‑shocks — Credit spreads ▲ · Fed policy path ▲ · Recession signal ▲ — which propagate through our causal graph to the markets below.
If it happens — the markets it would move
Biggest moves first. Projected moves are cascade-model priors; hist A–B% = what comparable past events actually did (measured abnormal returns), and model prior · unmeasured marks markets with no analogue backing yet. Tap any market for its price history.
| Market | Class | Projected move | |
|---|---|---|---|
| 1 | MicroStrategy MSTRon Hyperliquid 📈 chart | Equity | ▼ -2.6% hist -4.03–+0.13% · other way +14.34% (n=12) |
| 2 | Solana SOLon Hyperliquid 📈 chart | Crypto | ▼ -1.8% hist -7.5–+5.17% · other way +5.04% (n=10) |
| 3 | Bitcoin BTCon Hyperliquid 📈 chart | Crypto | ▼ -1.5% hist -6.93–+3.2% · other way +0.91% (n=10) |
| 4 | Nasdaq 100 NDXon Hyperliquid 📈 chart | Index | ▼ -1.5% hist -1.24–-0.42% · other way +0.07% (n=12) |
| 5 | High-yield credit HYG 📈 chart | Rate | ▼ -1.2% hist -1.01–-0.22% · other way -0.31% (n=12) |
| 6 | Tech sector XLK 📈 chart | Equity | ▼ -1.3% hist -0.95–-0.24% · other way +0.39% (n=12) |
| 7 | Hyperliquid (HYPE) HYPEon Hyperliquid | Crypto | ▼ -1.3% model prior · unmeasured |
| 8 | Financials XLF 📈 chart | Equity | ▼ -1.2% hist -1.26–-0.13% · other way +0.86% (n=12) |
| 9 | Ether ETHon Hyperliquid 📈 chart | Crypto | ▼ -1.3% hist -3.33–+1.13% · other way +6.67% (n=10) |
| 10 | Volatility (VIX) VIXon Hyperliquid 📈 chart | Vol | ▲ +1.1% hist -1.1–+4.09% · other way -4.32% (n=12) |
| 11 | S&P 500 SPXon Hyperliquid 📈 chart | Index | ▼ -0.9% hist -1.81–+0.27% · other way +1.5% (n=12) |
| 12 | Coinbase COINon Hyperliquid 📈 chart | Equity | ▼ -0.9% hist -4.28–+6.84% · other way +12.41% (n=8) |
| 13 | JPMorgan JPM 📈 chart | Equity | ▼ -0.7% hist -0.82–-0.07% · other way +0.97% (n=12) |
| 14 | Gold XAUon Hyperliquid 📈 chart | Commodity | ▼ -0.6% hist -0.56–-0.11% · other way -1.0% (n=12) |
Probable recommendation
Why we may diverge from history
Trust the cascade short on MSTR — +17.3% is a BTC-squeeze regime artifact, not an ARM-delinquency read; but flag the XAU short as over-reaching, since gold's +13% Lehman analogue is clean rate-shock haven demand.
Historical precedent — what analogous events actually did
Across 36 analogous events (overlap‑weighted), as abnormal returns — market beta stripped, so it's the event's own effect, not the market backdrop. Shown at 20 days (persistent) and 5 days (immediate); ↺ fades = the two horizons disagree. Confidence = consistency × sample × significance.
| Asset | History says | Abnormal (20d · 5d) | Hit | n | Confidence | vs cascade |
|---|---|---|---|---|---|---|
| COIN COIN | LONG | +7.4% · 5d +7.7% | 86% | 7 | 0.49 | ⚠ differs |
| KRW KRW | SHORT | -1.5% · 5d +0.1% ↺ fades | 71% | 28 | 0.40 | ✓ matches cascade |
| MRVL MRVL | SHORT | -1.8% · 5d -3.5% | 72% | 29 | 0.38 | ✓ matches cascade |
| High-yield credit HYG | SHORT | -0.4% · 5d +0.1% ↺ fades | 64% | 25 | 0.23 | ✓ matches cascade |
| Bitcoin BTC | SHORT | -6.0% · 5d -4.5% | 64% | 11 | 0.21 | ✓ matches cascade |
| JPM JPM | SHORT | -0.4% · 5d -1.6% | 62% | 34 | 0.20 | ✓ matches cascade |
| GBPUSD GBPUSD | SHORT | -0.4% · 5d -0.1% | 61% | 28 | 0.20 | ✓ matches cascade |
| MSTR MSTR | SHORT | -2.5% · 5d -2.8% | 62% | 29 | 0.19 | ✓ matches cascade |
| ETH ETH | SHORT | -2.4% · 5d -4.5% | 62% | 8 | 0.16 | ✓ matches cascade |
| AUD AUD | SHORT | -0.7% · 5d -0.1% | 57% | 28 | 0.13 | ✓ matches cascade |
| CL CL | SHORT | -2.0% · 5d -1.9% | 59% | 29 | 0.13 | ✓ matches cascade |
| XHB XHB | SHORT | -0.5% · 5d -0.1% | 57% | 28 | 0.12 | ✓ matches cascade |
| US dollar DXY | LONG | +0.7% · 5d +0.2% | 56% | 36 | 0.10 | ✓ matches cascade |
| TRY TRY | LONG | +0.5% · 5d +0.7% | 57% | 28 | 0.10 | ⚠ differs |
Why this probability
ARM resets bite stretched buyers, but most stock fixed-rate; delinquency rise modest. A base‑rate‑anchored prior, continuously scored against what actually happens — not a forecast.