What if Credit-cycle turn: HY default rate climbs past 7%?
A maturity wall meets slowing growth, pushing the high-yield default rate above 7% and forcing loss recognition across leveraged balance sheets. Widening spreads and falling equity prices mark the cycle turn.
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 1–3 years 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 maturity wall meets slowing growth, pushing the high-yield default rate above 7% and forcing loss recognition across leveraged balance sheets. Widening spreads and falling equity prices mark the cycle turn. The trigger decomposes into signed root‑shocks — Volatility (VIX) ▲ · Credit spreads ▲ · Recession signal ▲ · Risk appetite ▼ — 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 | ▼ -1.8% hist -4.24–+0.6% · other way +26.61% (n=12) |
| 2 | Volatility (VIX) VIXon Hyperliquid 📈 chart | Vol | ▲ +1.4% hist -0.26–+0.97% · other way -3.49% (n=12) |
| 3 | Solana SOLon Hyperliquid 📈 chart | Crypto | ▼ -1.4% hist -14.62–+5.01% · other way -1.04% (n=11) |
| 4 | Nasdaq 100 NDXon Hyperliquid 📈 chart | Index | ▼ -1.2% hist -0.72–-0.39% · other way +0.35% (n=12) |
| 5 | Hyperliquid (HYPE) HYPEon Hyperliquid | Crypto | ▼ -1.1% model prior · unmeasured |
| 6 | High-yield credit HYG 📈 chart | Rate | ▼ -1.1% hist -0.95–-0.2% · other way -0.16% (n=12) |
| 7 | Ether ETHon Hyperliquid 📈 chart | Crypto | ▼ -1.0% hist -7.65–+3.86% · other way +4.87% (n=11) |
| 8 | Bitcoin BTCon Hyperliquid 📈 chart | Crypto | ▼ -1.0% hist -1.04–-0.02% · other way +6.05% (n=11) |
| 9 | Financials XLF 📈 chart | Equity | ▼ -1.0% hist -1.84–+0.17% · other way -0.09% (n=12) |
| 10 | S&P 500 SPXon Hyperliquid 📈 chart | Index | ▼ -0.8% hist -1.09–+0.0% · other way -0.44% (n=12) |
| 11 | Tech sector XLK 📈 chart | Equity | ▼ -0.8% hist -0.66–+0.25% · other way +0.36% (n=12) |
| 12 | Coinbase COINon Hyperliquid 📈 chart | Equity | ▼ -0.7% hist -3.75–+3.63% · other way +21.75% (n=11) |
| 13 | JPMorgan JPM 📈 chart | Equity | ▼ -0.6% hist -1.28–+0.12% · other way +1.78% (n=12) |
| 14 | Semiconductors SMHon Hyperliquid 📈 chart | Equity | ▼ -0.5% hist -0.74–+1.78% · other way +2.88% (n=12) |
Probable recommendation
Historical precedent — what analogous events actually did
Across 39 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 |
|---|---|---|---|---|---|---|
| SOL SOL | SHORT | -13.1% · 5d -10.6% | 100% | 6 | 0.59 | ✓ matches cascade |
| AVGO AVGO | LONG | +4.6% · 5d -0.4% ↺ fades | 71% | 24 | 0.40 | ⚠ differs |
| ETH ETH | SHORT | -7.1% · 5d -5.2% | 70% | 10 | 0.31 | ✓ matches cascade |
| COIN COIN | LONG | +4.5% · 5d +8.1% | 67% | 6 | 0.27 | ⚠ differs |
| JPM JPM | SHORT | -0.9% · 5d -1.5% | 64% | 38 | 0.24 | ✓ matches cascade |
| SMH SMH | LONG | +1.8% · 5d -0.2% ↺ fades | 63% | 35 | 0.22 | ⚠ differs |
| XLF XLF | SHORT | -1.2% · 5d -1.3% | 61% | 35 | 0.20 | ✓ matches cascade |
| CL CL | SHORT | -3.0% · 5d -2.4% | 62% | 35 | 0.19 | ✓ matches cascade |
| MSTR MSTR | SHORT | -3.1% · 5d -3.1% | 62% | 35 | 0.17 | ✓ matches cascade |
| High-yield credit HYG | SHORT | -0.4% · 5d -0.3% | 60% | 31 | 0.17 | ✓ matches cascade |
| Volatility VIX | SHORT | -0.8% · 5d +4.6% ↺ fades | 56% | 36 | 0.12 | ⚠ differs |
| Gold XAU | LONG | +1.0% · 5d +0.0% | 56% | 35 | 0.12 | ✓ matches cascade |
| Bitcoin BTC | LONG | +0.5% · 5d -3.1% ↺ fades | 56% | 13 | 0.10 | ⚠ differs |
| NDX NDX | LONG | +0.0% · 5d -1.1% ↺ fades | 55% | 37 | 0.08 | ⚠ differs |