What if rate normalization fails to fix regional-bank profitability and stocks trade below 0.5x book?
Rate normalization fails to repair regional-bank profitability and a cohort of regionals trade below 0.5x price-to-book, signalling market doubt that franchise value survives bond losses plus structurally weak deposit margins.
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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 (electric blue) over time vs the market's (Polymarket, amber), 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. Loading the probability audit trail…
What it would mean
If this plays out, it is a risk-off shock. Rate normalization fails to repair regional-bank profitability and a cohort of regionals trade below 0.5x price-to-book, signalling market doubt that franchise value survives bond losses plus structurally weak deposit margins. The trigger decomposes into signed root‑shocks — Credit spreads ▲ · Financial conditions ▲ · Recession signal ▲ · Risk appetite ▼ — which propagate through our causal graph to the markets below.