Our Mission

Valo Macro is a research firm focused on identifying systemic risk through the mechanics of the financial system itself.

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Markets do not become unstable simply because investors change their minds. They break when the system that intermediates risk—dealer balance sheets, funding markets, and liquidity channels—begins to fail. These stresses are rarely visible in headline data or conventional macro indicators. They emerge first in the financial plumbing.

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Our work is built on the premise that financial markets are probabilistic, state-dependent systems, and that the most important information about risk resides not in prices alone, but in the capacity of the system to absorb shocks. When that capacity weakens, volatility clusters, correlations rise, and losses become nonlinear.

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Valo Macro specializes in diagnosing the state of the monetary and funding system. We study how liquidity is created, constrained, and withdrawn across dealer balance sheets, repo and funding markets, and global dollar channels. These forces determine whether markets dampen volatility or amplify it. They also determine when historical relationships break down.

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A core foundation of our framework is that risk is regime dependent. The same policy action or macro shock can have benign effects in one environment and severe consequences in another, depending on balance sheet capacity and funding conditions. Understanding which regime the system is in is therefore more important - and more attainable - than predicting the shock itself.

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We approach market price action as a latent state problem. Liquidity and balance sheet constraints are not directly observable, but they leave measurable signatures in funding spreads, price dispersion, and volatility dynamics. By analyzing these signals collectively, we seek to identify when the system is transitioning from linear, shock absorbing behavior to nonlinear, shock amplifying behavior.

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The primary output of this work is a market stress and convexity gauge designed to assess:

• whether liquidity conditions are improving or deteriorating

• whether volatility is likely to persist rather than mean revert

• whether correlations are likely to rise

• whether downside risks are becoming asymmetric​

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Our unique plumbing framework has repeatedly led to conclusions that differ from consensus. Notably, our analysis identified severe monetary and balance sheet stress in early 2023 - ahead of the collapse of Silicon Valley Bank - at a time when prevailing views characterized liquidity conditions as abundant and improving.

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Valo Macro exists to provide investors and advisors with early warning when financial systems become fragile, and to help them navigate markets not as static models, but as adaptive systems constrained by balance sheets and liquidity.