The Altitude Index folds valuation, the federal balance sheet, rates and credit, index concentration and market volatility into a single number. It does not say when. It says how high we are flying.
See what drives itMost market indicators answer the wrong question. They try to tell you what happens next, and they are almost always wrong about the timing, because timing is the one thing markets guard most closely. The Altitude Index answers a narrower question that can actually be answered: given where valuations, the federal balance sheet, interest rates, index concentration and volatility currently sit, how much room has already been priced away?
That is a statement about conditions, not events. A pilot flying at thirty-eight thousand feet is not in trouble. But the altimeter still tells him something real, and what it tells him is that the ground is a long way down. Every input in this index is a measure of how far the ground is, and none of them is a measure of whether the engines are about to quit.
The distinction matters more than it sounds. A reading of 88 has been available, in some form, for several years running. Anyone who treated it as a signal to leave the market would have done themselves permanent damage. Anyone who treated it as a reason to hold a larger cash reserve, to check how much of their retirement sits in one employer's stock, or to decide in advance what they would do in a thirty percent decline, would have made a structural decision that costs very little if the reading turns out to have been noise.
Each pillar holds two or three inputs rather than one, because several of the best-known measures say the same thing twice. CAPE and market-cap-to-GDP are both valuation; giving each its own slot would quietly make valuation forty percent of the index. Each input is scored against its own history rather than against a fixed threshold, then averaged inside its pillar, then weighted.
Every input is converted to a percentile against its own history before it enters the index: thirty years for the market series, the full available record for the fiscal ones. Nothing is scored against a fixed line like "CAPE above thirty is expensive."
That choice does most of the work. CAPE has drifted structurally upward for forty years, for reasons that include changed accounting, a larger share of asset-light businesses and a lower cost of capital than the 1970s. A fixed threshold set in 1990 would have read "expensive" for almost the entire period since, which is another way of saying it would have carried no information at all. A percentile adapts to that drift while still registering when a measure reaches the top of its own distribution, which is where several of these inputs currently sit.
The weights are a judgment, not a statistical result. Valuation carries the most because it has the strongest historical relationship to long-horizon returns. Concentration is included at all because it is the input that most often converts a diversified-looking portfolio into an undiversified one. Reasonable people would set these differently, and the same underlying data would then produce a different number.
The inputs move at different speeds. Rates and credit, volatility and concentration move daily. Valuation moves daily in its numerator and quarterly in its denominator, because GDP is reported quarterly. Sovereign credit moves quarterly, and jumps when the Congressional Budget Office publishes. The page itself is not a live feed: it is reviewed and rebuilt by hand, normally once a month, and the date shown on the dial is the date of that review. A reading is therefore current as of that date, and stale by up to a quarter in the components that are only reported quarterly.
An altimeter has never once told a pilot when the plane will come down. It has told a great many of them how much time they would have to fix the problem if it did. That is the whole of what this number is for.
None of these require a view on when. All of them are worth doing at any altitude, and all of them are worth doing sooner when the reading is high.
I built this because I believe the conditions in front of us are more stretched than anything I have seen in my working life, and because I think the reckoning, when it comes, will be larger than 2008. I have written three books circling that conviction and I am not going to pretend to a neutrality I do not have.
What I will not do is tell you when. I do not know, nobody does, and the record of people who claimed otherwise is not a record anyone should want. This index is not a market call and it is not a recommendation to buy or sell anything. It is a description of conditions, published so that the reasoning behind it can be checked rather than taken on trust.
If it stays at this altitude for the next three years while markets rise, that will not have made it wrong. It will have made it a measure of altitude, which is what it says on the label.
The index describes the weather. What matters is whether your particular plan is built to sit through it.
Bailey Financial Services, Inc. is a state-registered investment adviser. Registration does not imply a certain level of skill or training. This page is for educational purposes only and is not investment, tax, or legal advice, nor an offer or solicitation to buy or sell any security. Nothing here is individualised to any person's circumstances.
The Altitude Index is a proprietary composite constructed by Wilder Bailey. The selection of inputs, the choice of historical windows and the weighting of the five pillars are the author's own judgment, not an industry standard, and reasonable practitioners would construct it differently and arrive at different readings. The index is new and has no live track record; any historical values shown are back-calculated using inputs selected with knowledge of subsequent market history, which is a recognised source of bias.
The index is a description of current conditions. It is not a forecast, a prediction of market direction, a market-timing signal, or a recommendation to buy, sell, or hold any security or to alter any allocation. No date is expressed or implied for any market outcome. Elevated readings have historically persisted for extended periods during which markets rose substantially, and acting on such readings has caused lasting harm to investors.
Underlying figures are drawn from third-party sources believed reliable but not independently verified, and are subject to revision. Some component series are reported quarterly and may lag the page by up to one quarter. Past performance is not indicative of future results.
References to third parties, publications, index providers and data sources are for identification and educational context only. They do not imply affiliation with, sponsorship by, or endorsement from any of them. Bailey Financial Services, Inc. is not affiliated with Southern Company, Georgia Power, or any utility employer, nor with S&P Dow Jones Indices, the Federal Reserve System, or the Congressional Budget Office.