A Closer Look At How We Actually Model The U.S. Economy

Below is a closer look at how our macro team dynamically forecasts the U.S. economy. In other words, how we "makes the sausage."

The results form the foundation of our investment conclusions. We call it our GIP (Growth, Inflation, Policy) model. Here's how it works as articulated by Hedgeye CEO Keith McCullough in today's Early Look.

1. There are 2 core factors = GROWTH & INFLATION
2. The underlying modeling premise is rate of change
3. GROWTH and INFLATION are either accelerating or decelerating (in rate of change terms)

That gives us 4 quadrants (we call them “quads”):

As you can see below in our Chart of The Day from today's Early Look, U.S. economic growth for 3Q 2016 and 4Q 2016 is in the top right-hand quadrant. This means both growth and inflation are accelerating. Shortly thereafter, in 1Q 2017, our model dips back into Quad 3. In other words, growth slows as inflation accelerates.

There are obviously a number of ways for investors to play this. Click here to learn more.