Last week our Macro team presented the 1Q21 Macro Themes. Measuring, mapping and forecasting the rate of change of growth and inflation means we’re in both USA and global Quad2. Quad2 represents the scenario where both growth and inflation are accelerating. The market started to shift to reflecting Quad2 around late October into early November and it hasn't looked back. In Quad2 consumer discretionary in general does well. Within consumer discretionary, growthier segments like ecommerce and luxury usually do very well. ‘Staple’ like retail (like WMT/COST) and rate sensitive retail (home/durables) usually underperform significantly (rates rise in Quad2). The current outlook is Quad 2 in 1Q21 and 2Q21, then migrating to Quad4 (inflation and growth decelerating) in 3Q21. The macro setup has been contributing to the recent strong performance of our long ideas, it of course is also putting upward pressure on many consumer shorts. Below are Quadrant performance back test summaries of various retail sub sectors and relevant tickers. In the current Quad setup and with our overall TREND view of retail we'd be net long of retail, and have long and short ideas in the majority of the various sub categories.
