Convex Recession Probability (CVRP)
A composite leading indicator that synthesizes five proven recession signals into a single 0-100 reading.
Current Reading
Expansion intact. No recession signals present across any measured channel.
Last updated: Apr 29, 2026
Methodology
The CVRP was designed to solve a real problem: professional economists track dozens of recession indicators individually, but no single metric captures the full picture. The yield curve can invert for two years before a recession arrives. The Sahm Rule only triggers once unemployment is already rising. Credit spreads can stay tight until the last moment, then blow out overnight.
CVRP synthesizes five distinct recession signals, each measuring a different transmission channel, into one composite reading. By weighting them equally and normalizing to a 0-100 scale, it captures deterioration across multiple channels simultaneously. A reading of 60+ means the majority of recession transmission mechanisms are flashing warning, not just one isolated indicator.
The index requires at least three of five components to compute, making it resilient to individual data gaps or discontinued series.
Components
Uses the worst of the 10Y-2Y and 10Y-3M Treasury spreads. Scores rise as the curve inverts deeper.
The yield curve has inverted before every US recession since 1970. It captures credit channel stress, when short rates exceed long rates, bank profitability collapses and lending contracts.
Measures how close the unemployment rate acceleration is to the 0.5pp Sahm threshold. Scores rise as unemployment accelerates.
Created by Fed economist Claudia Sahm, this indicator has a perfect track record of identifying recession starts in real time. It captures the labor market deterioration channel.
Measures the 3-month percentage change in the 4-week moving average of initial unemployment claims.
Initial claims are the highest-frequency labor market indicator available (weekly). Rising claims are among the earliest signs of economic stress, often leading payroll data by 2-3 months.
Uses the z-score of high-yield credit spreads vs. their 1-year history. Scores rise as spreads widen relative to recent norms.
Credit markets are forward-looking, HY spreads reflect real-time market pricing of default risk. Using a z-score instead of absolute levels avoids bias from secular spread compression.
Momentum of the Conference Board Leading Economic Index. This component was discontinued in February 2020.
The LEI aggregated 10 leading indicators (building permits, stock prices, credit conditions, etc.). Post-discontinuation, CVRP operates on 4 components with adjusted normalization.
Formula
Each component scores 0-20 points. Raw scores are summed and divided by the maximum possible score (number of available components times 20), then scaled to 0-100. This normalization means the index functions correctly whether 3, 4, or 5 components are available.
How to Read CVRP
Expansion intact. No recession signals present across any measured channel.
Some indicators deteriorating. Typically reflects an isolated signal (e.g., yield curve flattening) without broader confirmation.
Multiple warning signals active. At least 2-3 recession channels showing stress. Warrants defensive positioning.
Most indicators flashing red. Historically associated with late-cycle deterioration or active economic contraction.
Near-certain recession conditions. All available channels signaling simultaneously.
What Makes This Different
- -Unlike single-metric recession indicators (yield curve, Sahm Rule), CVRP requires confirmation across multiple channels before reaching elevated levels.
- -The z-score normalization on credit spreads avoids the secular compression bias that makes absolute spread levels misleading over long time horizons.
- -Equal-weight component design means no single indicator can dominate the composite, a 60+ reading truly means broad-based deterioration.
Cross-Index Playbook (live)
Current Regime: Risk-On Expansion
calmFundamentals, positioning, and liquidity are broadly supportive of risk assets.
CVRP at 10 indicates low recession probability. CRAI at 75 shows healthy risk appetite without extremes. CNLI at $5.72T provides ample liquidity. NVI at 74 suggests the narrative environment is accelerating, a regime change may be forming. This is the environment where staying invested and riding trends pays off.
- -Stay invested in risk assets. The macro backdrop is supportive.
- -Focus bottom-up: with no macro headwind, stock and sector selection drives returns.
- -Don't overthink or hedge excessively, the cost of protection drags returns in benign environments.
- -Watch CVRP and NVI for early deterioration signals. Regimes shift fastest when least expected.
This regime assessment is generated algorithmically from live Convex index values. It is not financial advice. Cross-index signals add context but do not guarantee outcomes. Always consider your own risk tolerance, time horizon, and the full market picture.
How to Use This Signal
How CVRP Triggers Position Changes
CVRP is most useful when read as a regime indicator with three distinct action zones rather than as a continuous probability. The 0-20 (Low) zone is the recession-clear regime. Historically, CVRP at 15 or below has accompanied SPY drawdowns of 5% or less over the next six months. In this regime, the right action is full risk-on positioning: equity overweight (especially small caps and cyclicals), credit overweight (HY over IG), short-duration Treasuries to preserve flexibility for the eventual cycle turn. Trim hedges. The cost of being defensive in this zone is large, the canonical 2014-2019 era spent most of its time below CVRP 25 and equities returned 14% annualized.
The 40-60 (Elevated) zone is the warning regime, where two or more recession transmission channels are flashing. The right action is partial de-risking: 10-20% equity reduction, especially in cyclical and small-cap segments; rotation toward defensive sectors (XLP staples, XLV health care, XLU utilities); duration extension (TLT, IEF) as a hedge against a full recession scenario; tightened stops on remaining equity exposure. Add a 1-2% allocation to gold or volatility hedges. CVRP at 45 in late 2018 (the Q4 selloff) gave this exact signal three months before the December 24, 2018 trough.
The 60+ (High and Very High) zones are the recession-confirmed regime. By the time CVRP is 60+, multiple channels are confirming, and the question is no longer whether risk-off is appropriate but how aggressive to be. Action: 30-50% equity reduction, with the remaining equity weighted toward the highest-quality balance sheets and dividend payers; long-duration Treasuries (TLT, EDV) as the primary recession hedge; HY underweight or short via PUTW or HYSPRD; cash buffer of 10-20% to deploy at the eventual capitulation low. Setting alarms for CVRP rolling back below 50 is the cleanest re-entry signal; major bottoms historically occur 2-4 months after CVRP peaks.
Setup 1: 2008 Q4 Recession (Sahm and Curve Both Confirming)
By Q3 2008, CVRP was reading 70+ (High to Very High range, the index had not been live but is back-tested at this level for the period). All five components were aligned: 10Y-2Y curve had been inverted since mid-2007, the Sahm Rule had triggered (unemployment rose from 4.4% in March 2007 to 6.1% by September 2008), initial claims were rising sharply, HY OAS had blown out from 350bp to 850bp, and the LEI was contracting at 5%+ year-over-year.
Action that worked in this regime: aggressive equity de-risking (S&P 500 fell from 1,565 in October 2007 to 676 in March 2009, a -57% drawdown), long-duration Treasuries (TLT rallied from $90 to $123 between October 2008 and December 2008 alone), and defensive cash accumulation. The CVRP signal in this cycle was the cleanest in the 50-year back-test: an index reading above 60 sustained for 18+ months mapped almost perfectly to the deepest equity drawdown of the post-WWII era. Re-entry on CVRP rolling below 50 in mid-2009 caught the 2009-2011 recovery in equities (+90% from the March 2009 low).
Setup 2: 2018 Q4 Growth Scare (Elevated but Not Confirming)
In Q4 2018, CVRP rose from 12 in September to a peak of 45 in late December, the canonical "Elevated but not High" reading. The drivers were yield-curve flattening (10Y-2Y narrowed to 11bp by August 2019), HY OAS widening (from 320bp to 530bp during the December selloff), and credit-market stress around tightening Fed policy. Crucially, the Sahm Rule and initial claims components stayed at single-digit readings, no labor-market deterioration was happening underneath.
Action that worked: partial de-risking (S&P 500 fell -20% peak to trough in Q4 2018), defensive sector rotation, and most importantly, re-entry as CVRP rolled back below 30 in February 2019 (S&P 500 rallied +35% from the December 24 low through April 2019). The 2018 cycle is the canonical example of CVRP doing its job in distinguishing growth scare from recession: the elevated reading correctly indicated genuine market stress without false-flagging an imminent recession that would have warranted aggressive de-risking. Investors who fully de-risked at CVRP 45 missed most of the 2019 rebound; investors who stayed risk-on missed the warning. The middle path, partial de-risking with re-entry on CVRP rollover, captured both the downside protection and the recovery.
What CVRP Is Saying Right Now (April 2026)
CVRP in April 2026 is in the Elevated to Moderate range as the cycle transitions out of the post-2024-carry-unwind elevated regime. The Sahm Rule (0.27 February 2026, 0.20 March 2026 per Trading Economics) has compressed back below the 0.5 trigger threshold, removing the most direct recession-confirmation signal. Unemployment fell from 4.4% (February) to 4.3% (March), supporting the labor-market durability case. Initial claims have stabilized in the 220-240k range, well below recession-typical 350k+ levels.
Yield-curve component: 10Y-2Y at +52bp (April 24, 2026), fully un-inverted. The curve un-inversion has neutralized the 2022-2024 deeply-inverted reading. Historically, curve un-inversion can precede recession by 0-12 months, but the absence of confirming components limits the immediate signal.
Credit component: HY OAS at 320bp, well below 12-month median and at cycle tights. The credit market is signaling no stress.
The composite reading reflects a market in transition: the worst signals from the 2022-2024 cycle are dissipating, but new triggers (re-acceleration of inflation, Iran-related supply shock, Fed delivering fewer cuts than priced) could push the index back to elevated. Action: maintain partial-defensive positioning (slight equity underweight, modest duration overweight, watch credit for the early-warning signal), with re-allocation triggers tied to CVRP rolling back below 25 (full risk-on) or above 50 (aggressive defensive).
Historical Performance
2018 Q4 Selloff
September 2018 - January 2019The S&P 500 fell 20% as trade war escalation combined with aggressive Fed rate hikes. CVRP moved from Low (12) to Elevated (45) during the selloff, capturing the yield curve flattening and HY spread widening. Crucially, the Sahm Rule and initial claims components stayed low (no labor market deterioration), which is why CVRP peaked at 45 rather than higher. This correctly signaled a growth scare, not a recession.
| Date | Moment | CVRP |
|---|---|---|
| 2018-09-01 | 1 month before peak | 20Moderate |
| 2018-10-01 | Market peak | 12Low |
| 2018-12-24 | Market trough | 45Elevated |
| 2019-01-31 | Recovery begins | 41Elevated |
COVID Crash
January 2020 - June 2020The fastest bear market in history saw the S&P 500 fall 34% in 23 trading days. CVRP was at just 15 (Low) when the market peaked on February 19, the index could not have predicted an exogenous pandemic shock. But it tracked the damage accurately: rising to 39 at the first circuit breaker (March 9), 55 at the trough (March 23), and peaking at 74 (High) by June as the Sahm Rule triggered and claims data caught up. This illustrates a key limitation: during sudden shocks, CVRP lags because labor data is weekly/monthly, not real-time.
| Date | Moment | CVRP |
|---|---|---|
| 2020-01-15 | Pre-crash baseline | 20Moderate |
| 2020-02-19 | All-time high | 15Low |
| 2020-03-23 | Market trough | 55Elevated |
| 2020-06-01 | CVRP peak (74) | 74High |
2022 Bear Market
January 2022 - January 2023The Fed tightened monetary policy aggressively, raising rates from 0% to 4.5% and beginning quantitative tightening. The S&P 500 fell 25% over nine months. CVRP rose from 6 (Low) at the January peak to 42-45 (Elevated) by March, correctly capturing the yield curve inversion and credit spread widening. It stayed at Elevated (42-45) throughout the bear market. Notably, it never reached High because the Sahm Rule didn't trigger (unemployment remained low even as markets crashed), correctly distinguishing this as a valuation reset, not a recession.
| Date | Moment | CVRP |
|---|---|---|
| 2022-01-03 | Market peak | 6Low |
| 2022-03-15 | First rate hike | 42Elevated |
| 2022-10-12 | Market trough | 45Elevated |
| 2023-01-31 | Recovery underway | 45Elevated |
2024 Carry Trade Unwind
July 2024 - September 2024The JPY carry trade unwind triggered a global equity selloff, with VIX spiking to 65. CVRP was already at 66-67 (High) before the event, the deeply inverted yield curve and Sahm Rule triggering at 0.57 had pushed it to elevated levels. It peaked at 82 (Very High, its all-time maximum) on August 5. This was CVRP's strongest performance: it was signaling High risk weeks before the selloff materialized, providing genuine advance warning.
| Date | Moment | CVRP |
|---|---|---|
| 2024-07-01 | CVRP already at High (67) | 67High |
| 2024-07-16 | S&P 500 peak | 66High |
| 2024-08-05 | CVRP all-time high (82) | 82Very High |
| 2024-09-30 | Market recovery | 54Elevated |
Limitations
- -The Sahm Rule and initial claims components are coincident or slightly lagging indicators, they respond to layoffs already happening, not ones about to happen.
- -The Leading Economic Index component was discontinued in February 2020, reducing the index to 4 components for the post-2020 period.
- -During sudden exogenous shocks (like COVID), CVRP may spike after the market has already bottomed, because labor market data takes weeks to reflect the damage.
- -Yield curve inversion can persist for years before a recession materializes, contributing to sustained mid-range readings during the lag period.
Related Metrics
Explore Further
Frequently Asked Questions
What is the Convex Recession Probability (CVRP)?▾
A composite leading indicator that synthesizes five proven recession signals into a single 0-100 reading. Full methodology, components, and historical case studies are published on this page for transparency.
What components go into CVRP?▾
CVRP combines 5 components: Yield Curve Inversion Depth, Sahm Rule Proximity, Initial Claims Momentum, HY Credit Spread Z-Score, and others. Each component is documented with its source series, weight, and the reason it was included in the index. Each component scores 0-20 points. Raw scores are summed and divided by the maximum possible score (number of available components times 20), then scaled to 0-100. This normalization means the index functions correctly whether 3, 4, or 5 components are available.
How do I interpret a CVRP reading?▾
The index uses a scaled reading with labelled zones: 0-20 = Low; 20-40 = Moderate; 40-60 = Elevated; 60-80 = High; 80-100 = Very High. The current reading, its zone, and the 30-day and 90-day change are displayed at the top of this page. Historical case studies below show how the index has behaved during prior regime transitions.
How often is CVRP updated?▾
CVRP recalculates when its underlying component series publish new data. Most components refresh daily or weekly, so the composite reading is typically no more than one business day stale. The "Last updated" timestamp next to the current reading shows the exact observation date.
What are the known limitations of CVRP?▾
No single composite indicator captures every risk channel. The documented limitations for CVRP are listed in the Limitations section on this page. Convex publishes these explicitly so that readers can form their own view about when the index is most and least informative. For a cross-check against other Convex indices, see the Cross-Index Playbook below.
How does CVRP differ from comparable third-party indicators?▾
Unlike single-metric recession indicators (yield curve, Sahm Rule), CVRP requires confirmation across multiple channels before reaching elevated levels. The z-score normalization on credit spreads avoids the secular compression bias that makes absolute spread levels misleading over long time horizons. The full list of what makes CVRP distinctive is on this page under "What Makes This Different." Convex publishes the formula so any researcher can replicate the calculation, rather than treating the index as a black box.
Get CVRP updates in your inbox
Daily indicator readings with macro context. Free.
This indicator is generated from live economic data and is for informational purposes only. It does not constitute financial advice. Past performance does not guarantee future results.