Credit-Market Sentiment and the Business Cycle. Jeremy Stein, April 20, 2015, Paper. “Using U.S. data from 1929 to 2013, we show that elevated credit-market sentiment in year t–2 is associated with a decline in economic activity in years t through t+2. Underlying this result is the existence of predictable mean reversion in credit-market conditions. That is, when our sentiment proxies indicate that credit risk is aggressively priced, this tends to be followed by a subsequent widening of credit spreads, and the timing of this widening is, in turn, closely tied to the onset of a contraction in economic activity…Link