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Editor's Note: Below is a brief excerpt from an Early Look written by Senior Macro analyst Darius Dale. Click here to learn more about the Early Look.

Our Growth/Inflation/Policy Model – or “GIP Model” for short – is specifically designed to contextualize financial market returns through the lens of an exhaustive set of regimes born out of the two most important top-down factors to solve for as capital allocators: economic growth and inflation – each principal components in their own right.

To review:

  1. #Quad1: Real GDP growth accelerating while Headline CPI decelerates; this environment has historically favored risk taking in growth-oriented factor exposures.
  2. #Quad2: Real GDP growth accelerating while Headline CPI accelerates concomitantly; this environment has historically favored risk taking in inflation-oriented factor exposures.
  3. #Quad3: Real GDP growth decelerating while Headline CPI accelerates; this environment has historically favored a defensive reach for yield.
  4. #Quad4: Real GDP growth decelerating while Headline CPI decelerates concomitantly; this environment has historically favored raising cash and/or one’s allocation to the long bond. 

A Glimpse Inside Our Growth/Inflation/Policy (GIP) Model - z robbo