Macro Quad
The macro quad is a way of describing the economy using only two variables: whether growth is accelerating or decelerating, and whether inflation is rising or falling. Crossing those two answers gives four boxes, and each box has historically favoured different assets.
How it is measured
The quad asks about direction, not level. It does not matter whether growth is high, only whether it is improving or deteriorating compared with recent trend, and the same applies to inflation.
The four combinations are conventionally named. Goldilocks is growth holding up while inflation cools. Reflation is growth accelerating alongside rising inflation. Stagflation is growth slowing while inflation stays elevated. Deflation is growth slowing and inflation falling.
How to read it
The quad matters most for one specific reason: the correlation between stocks and bonds is not fixed. It depends heavily on which box you are in. In Goldilocks both halves of a balanced portfolio tend to help at once. In Stagflation both tend to struggle together, which is exactly when the diversification you were relying on stops working.
The quad moves faster than the business cycle phase. It is normal for the quad to shift while the phase stays put, and that is usually the more actionable of the two signals.
A worked example
A conventional sixty forty portfolio is often described as diversified. That description holds in three of the four quads and fails in one. In Stagflation, rising inflation hurts bonds through rates while slowing growth hurts equities through earnings, so both sleeves fall together. The portfolio did not change. The quad did.
The most common mistake
Treating the quad as a forecast. It describes what growth and inflation are doing now, based on data already released. It carries no claim about what they will do next, and quads can shift faster than positioning can follow.
How CORVIX uses it
CORVIX publishes the current quad free alongside the cycle phase, because the two answer different questions and are most useful read together. The quad is the faster-moving of the pair.
Common questions
What is Macro Quad?
The macro quad is a way of describing the economy using only two variables: whether growth is accelerating or decelerating, and whether inflation is rising or falling. Crossing those two answers gives four boxes, and each box has historically favoured different assets.
How is macro quad measured?
The quad asks about direction, not level. It does not matter whether growth is high, only whether it is improving or deteriorating compared with recent trend, and the same applies to inflation. The four combinations are conventionally named. Goldilocks is growth holding up while inflation cools. Reflation is growth accelerating alongside rising inflation. Stagflation is growth slowing while inflation stays elevated. Deflation is growth slowing and inflation falling.
What is the most common mistake when using macro quad?
Treating the quad as a forecast. It describes what growth and inflation are doing now, based on data already released. It carries no claim about what they will do next, and quads can shift faster than positioning can follow.