Great framework, Geo. Looking at where we are today, we have some potentially very pro-growth policies from the incoming Trump administration but the degree of inflationary pressures is unclear, as is the Fed's reaction function. Given all of that, should we assume we are in firmly in quadrant 2?
We hit a stagflationary air pocket after the Dec FOMC, which has hit risk assets a bit. It's rare for quad 3 to transition to quad 2 because of concerns about tightening financial conditions stifling growth.
We need to first move through quad 1 or quad 4 before entering quad 2. Either we transition into a disinflation regime where inflation cools without any growth scare, or it turns into a growth scare like last August first before turning into disinflation. Either way, the Dec FOMC gave the market a wall of worry to climb, and the question is what the path will look like.
Thanks. I always viewed the quadrants in isolation, never zoomed out to view it as a cycle. Good insights thank you
Always learn a ton from you Geo thanks for your hard work brother!
Excellent
Great framework, Geo. Looking at where we are today, we have some potentially very pro-growth policies from the incoming Trump administration but the degree of inflationary pressures is unclear, as is the Fed's reaction function. Given all of that, should we assume we are in firmly in quadrant 2?
We hit a stagflationary air pocket after the Dec FOMC, which has hit risk assets a bit. It's rare for quad 3 to transition to quad 2 because of concerns about tightening financial conditions stifling growth.
We need to first move through quad 1 or quad 4 before entering quad 2. Either we transition into a disinflation regime where inflation cools without any growth scare, or it turns into a growth scare like last August first before turning into disinflation. Either way, the Dec FOMC gave the market a wall of worry to climb, and the question is what the path will look like.