Below is a brief excerpt transcribed from Friday's edition of The Macro Show hosted by Hedgeye CEO Keith McCullough

Dale: Quad 4 Economic Risk - 10 2 2020 12 41 42 PM

We’ve got Quad 4 in Q4 officially now.

WTI has effectively collapsed in the past 24 hours.

It’s down -8% to -9%. That’s had a pretty dramatic impact on our inflation forecast for Q4 in terms of the quarter-to-date signal. We’re tracking at -6 basis points day-over-day in terms of our headline CPI forecast. As you can tell that’s actually down from where we were in Q3.

The updated conditional probabilities associated with the “Quad 3 versus Quad 4” debate. Quad 3 is down to 40.7%. Quad 4 is up at 56.8%.

We’re using the economic forecast to anticipate changes in the volatility regimes of Keith’s market signals. But more importantly, we’re using Keith’s market signals to front-run eventual changes in economic data that other investors are likely to have to respond to.

This is why we care so much about whether we’re on one side of the boundary or another.

We had a call yesterday afternoon with some of our top clients and Keith said, ‘If you put a gun to my head, I’d probably put the Quad 4 portfolio on today.’

The Dollar started to signal higher lows in its Risk Range at the end of August and you had Nasdaq volatility rising.

Starting from that point all the way to today there have been a series of macroeconomic decisions made through the lens of Keith’s price-volume-volatility model and my Quads, all the different indicators that we look at, that continually said the probability of Quad 4 is rising.

And now we wake up and here we are.

The whole point of our process is to identify those things that, in an interconnected manner, are going to impact other parts of the ecosystem.

That’s how we get ahead of consensus which is not set up with these big Quad pivots, particularly for Quad 4 economic risk.