The short-term business and credit cycle (about 5-10 years)
Ray Dalio short-term debt cycle (~5-10yr): credit expansion drives above-trend output + rising inflation → central bank tightens → debt-service rises faster than income → asset-price contraction + recession → central bank eases → expansion restarts. Classical business-cycle mechanism; central-bank reaction function is primary modulator.
Predictions in this cycle
The US will finalize Basel III rules by 2028 — in a bank-friendly 'light-touch' form?
Quiet path · not yet modeled
No market signal
The 2025 fintech IPO class (Klarna, Chime, Circle) will underperform the market through 2027?
Quiet path · not yet modeled
No market signal
Between 2026 and 2028, 3-8 mid-size US banks will fail or be forced to merge?
Quiet path · not yet modeled
No market signal
The Fed will hold mostly steady from 2026 — not return to zero rates absent a crisis?
Quiet path · not yet modeled
No market signal
US office real estate stress will peak by 2027 — then slowly recover?
Quiet path · not yet modeled
No market signal
Private credit will have its first major stress test — with 5+ large defaults by 2028?
Quiet path · not yet modeled
No market signal
NBER declares a US recession with a start date in 2026 or 2027 by end of 2028?
Quiet path · not yet modeled
No market signal
The US high-yield corporate bond default rate stays below 5 percent at every monthly reading in 2027?
Quiet path · not yet modeled
Pressure moments
All →A correlated cross-border bank run
- deposit-flight event count at scalesteady
- interbank funding spreads (TED spread + LIBOR equivalents, FRA-OIS)steady
- central-bank emergency-liquidity-facility activation eventssteady
A short-cycle recession or growth-scare
- yield-curve inversion sustained durationsteady
- unemployment-rate 3-month-moving-average inflection (Sahm-rule trigger)steady
- ISM manufacturing below 50 sustainedsteady
Movers
All →Artist generation (sensitive adapters)
Leverage not yet scoredtoward A
toward B
Hero generation (civic team-builders)
Leverage not yet scoredtoward A
toward B
Nomad generation (pragmatic survivors)
Leverage not yet scoredtoward A
toward B
Model notes (framework)
The reconciliation note surfaces when this cycle’s top fork disagrees with the lean of its live child predictions — a sign the cycle’s read is tightening or breaking down.
See the method for how a cycle’s forks are set.