The Longest Streak of U.S. Growth Accelerating Ever?

04/12/18 08:38AM EDT

 Editor's Note: Below is a brief excerpt from today's Early Look written by U.S. Macro analyst Christian Drake. Click here to learn more about the Early Look.

The Longest Streak of U.S. Growth Accelerating Ever? - CoD2

Switching gears, quickly, to a question I’ve been asked about a lot over the past month regarding the prospective phase transition in growth and volatility. 

The Chart of the Day below is from our 2Q Macro Themes deck and plots the consecutive number of quarters of accelerating growth (x-axis) vs 90-day realized volatility on the y-axis. 

There are a few simple but significant observations and one larger, equally significant implication:

  • A realized acceleration in 1Q growth would tie us for the longest streak of accelerating growth ever.
  • Protracted accelerations in growth perpetuate a positive, self-reinforcing cycle of low volatility and passive investment flows.
  • Cumulative flows associated with investing in a particular regime/environment can be significant, particularly when that environment has persisted for the longest period ever. 

Because growth masks and/or predominates over pretty much every other investment factor/risk, imbalances can build and risks can cumulate latently .… until the growth cycle inflects.

The Longest Streak of U.S. Growth Accelerating Ever? - early look

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