Below is a brief excerpt transcribed from Wednesday's edition of The Macro Show hosted by Hedgeye CEO Keith McCullough.
Consumption growth and inflation go together.
Within Quad 4, inflation falls while real consumption accelerates. You will see people’s consumption going up because the things they are consuming are going down. Profit margins widen.
I don’t want to insult anyone’s intelligence, but literally 95% percent of commentary about “the consumer is in great shape” is not acknowledging this basic phase transition that is occurring in these two core patterns, margins at the corporate level and how people consume.
This is critical.
Now on our current Quad 3 call, the consumption curve is going from the peak of the cycle down, and inflation is going up.
In that environment, profit margins go down! The consumer isn’t in great shape, it's slowing!
And don’t forget that Retail Sales just hit a 7th month low.
Study the Quad model and learn the process.
