A Two-Part Framework to Explain Equity Performance
A Two-Part Framework to Explain Equity Performance
Analysis that combines inflation and growth cycle trends may provide a more nuanced way to understand stock market drivers.
- The framework uses the two dimensions of inflation and cyclicality to describe four economic regimes.
- The four quadrants each align with industry sectors that tend to do well in that scenario.
- The framework uses the historical risk-adjusted returns for all S&P 1500® industries during unexpectedly high and low inflation regimes and unexpectedly high and low growth regimes to assign an inflation and a growth score to each industry.
- The consultants review these regimes and a range of charts to provide insight related to equity positioning for an evolving inflationary environment and various landing scenarios.
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