diff --git a/pyproject.toml b/pyproject.toml
index fdb37b2..56bc5ba 100644
--- a/pyproject.toml
+++ b/pyproject.toml
@@ -4,7 +4,7 @@ build-backend = "setuptools.build_meta"
 
 [project]
 name = "alpha-engine-lib"
-version = "0.41.0"
+version = "0.42.0"
 description = "Shared utilities for the Alpha Engine modules: preflight, logging, ArcticDB, dates, decision capture, cost telemetry, Anthropic payload chokepoint, artifact freshness, RAG, agent schemas, SSM secrets, Telegram + SNS alerts, EC2 spot resilience, SSM log-capture, SSM dispatcher, Step-Functions execution-state projection, and S3-conditional-PUT writer locks. Full surface documented in README."
 readme = "README.md"
 # EC2 still runs Python 3.9 on the always-on micro instance (boto3 drops
diff --git a/src/alpha_engine_lib/__init__.py b/src/alpha_engine_lib/__init__.py
index ec859c2..f2eba5c 100644
--- a/src/alpha_engine_lib/__init__.py
+++ b/src/alpha_engine_lib/__init__.py
@@ -1,3 +1,3 @@
 """alpha-engine-lib — shared utilities for Alpha Engine modules."""
 
-__version__ = "0.41.0"
+__version__ = "0.42.0"
diff --git a/src/alpha_engine_lib/agent_schemas.py b/src/alpha_engine_lib/agent_schemas.py
index d3ea8b3..23b8271 100644
--- a/src/alpha_engine_lib/agent_schemas.py
+++ b/src/alpha_engine_lib/agent_schemas.py
@@ -50,10 +50,19 @@
 # ── Literals ─────────────────────────────────────────────────────────────
 
 
-RegimeLiteral = Literal["bull", "neutral", "bear", "caution"]
+RegimeLiteral = Literal["bull", "neutral", "bear"]
 """Macro market regime — output of the macro_economist agent and the
 macro critic. Drives sector_modifiers downstream and the executor's
-graduated drawdown gate."""
+graduated drawdown gate.
+
+3-class Ang-Bekaert taxonomy. The legacy 4th value ``"caution"`` was
+retired in v0.42.0 (plan: caution-regime-retirement-260528.md): the
+rule-based caution override at the macro-agent layer double-counted
+signals already weighted into the continuous ``regime_intensity_z``
+META_FEATURE. Portfolio-protective drawdown state is now a separate
+axis (``drawdown_tier: Literal["risk_on","caution","risk_off"]``)
+emitted by the predictor's drawdown leg; consumers compose the two
+axes via most-protective override at decision time."""
 
 
 CIORawDecisionLiteral = Literal["ADVANCE", "REJECT", "NO_ADVANCE_DEADLOCK"]
diff --git a/tests/test_agent_schemas.py b/tests/test_agent_schemas.py
index 4be4635..fe5a13a 100644
--- a/tests/test_agent_schemas.py
+++ b/tests/test_agent_schemas.py
@@ -325,6 +325,33 @@ def test_regime_literal_enforced(self):
         with pytest.raises(ValidationError):
             MacroEconomistRawOutput(market_regime="exuberant")
 
+    def test_regime_literal_is_3class_caution_rejected(self):
+        # v0.42.0 retired "caution" from the macro market_regime taxonomy
+        # per caution-regime-retirement-260528.md. The 3-class Ang-Bekaert
+        # taxonomy (bull/neutral/bear) is the institutional baseline; the
+        # rule-based caution override at the macro-agent layer was double-
+        # counted by the continuous regime_intensity_z META_FEATURE.
+        # Portfolio-protective hysteresis (risk_on/caution/risk_off) is a
+        # separate axis emitted by the predictor drawdown leg.
+        from alpha_engine_lib.agent_schemas import (
+            MacroCriticOutput,
+            MacroEconomistRawOutput,
+        )
+
+        with pytest.raises(ValidationError):
+            MacroEconomistRawOutput(market_regime="caution")
+        with pytest.raises(ValidationError):
+            MacroCriticOutput(
+                action="revise", critique="elevated stress", suggested_regime="caution",
+            )
+
+    def test_regime_literal_accepts_all_3_classes(self):
+        from alpha_engine_lib.agent_schemas import MacroEconomistRawOutput
+
+        for regime in ("bull", "neutral", "bear"):
+            out = MacroEconomistRawOutput(market_regime=regime)
+            assert out.market_regime == regime
+
 
 class TestMacroCriticOutput:
     def test_accept_action(self):