Shortly before the U.S. stock market selloff in October, Hedgeye CEO Keith McCullough warned subscribers on The Macro Show that we were teetering on the edge of what we call Quad 4 where investors would be wise to adopt a defensive posture with respect to domestic Momentum/High Beta/Growth style factors.
He walked investors through various scenarios using our proprietary Growth, Inflation & Policy (GIP) Model. After seeing growth and inflation accelerate for the last five quarters (that’s Quad 2 in our model), the data suggested a significant move towards Quad 4 – growth and inflation slowing – in Q4.
“The market is having a lot of schizophrenic action between [Quad 2 and 4],” McCullough said. “Now we’re starting to get cautious in the U.S.”
On a related note, here are the top two Macro Themes we identified heading into Q4. These were released at the end of September.
Watch the full clip below from 9/18/18