My last note on FCI → FCI: Spiral Risks was focused on the need for the Fed to get serious about inflation before it ran away from them. We were in the early stages of the equity markets staging a historic bull move, and my models flagged the inflection point perfectly.
As a reminder, there are various FCI models out there. Goldman Sachs Index, the Bloomberg Index and the Fed’s own FCI-G impulse indices. All of these models have one simple assumption: growth impulse up = inflation impulse up, and vice versa. Where our models are completely unique is that we look at growth and inflation impulses separately. For a primer, see this note: Financial Conditions Reborn . Thus, we can identify any of the following regimes in ways the other models cannot:
Reflation, with both growth and inflation up together.
Inflation without growth, or with growth negative, which is stagflation.
Deflation, where both growth and inflation falter together.
Goldilocks, where growth surges without impacting inflation.
What do the models tell us today, and more importantly, where are the risks going forward? That is the focus of this note.
Comments
Nothing yet. Say the first thing.
Sign in to join the conversation.