In this episode, Liz Ann Sonders sits down with Keith McCullough, founder of Hedgeye, to revisit his “quads” framework—a model that categorizes market environments based on the direction of economic growth and inflation. McCullough emphasizes process over prediction, arguing that investors should focus on the momentum of these variables to adapt to rapidly shifting market conditions.

The conversation explores a volatile macro backdrop marked by geopolitical shocks, leadership changes at the Fed, and evolving market structure. McCullough explains how increased instability has accelerated market cycles, requiring a more nimble, data-driven approach. He outlines his view that inflation likely peaked and is set to decelerate, setting up a shift toward disinflation, and potentially slower growth, over the coming quarters.

They also discuss implications for asset allocation, including declining bond yields globally, a rotation away from mega-cap dominance, and opportunities in under-owned, rate-sensitive sectors like housing and real estate. McCullough highlights growing risks tied to market concentration, new equity supply (including major IPOs), and speculative activity, while stressing the importance of disciplined, rules-based investing.

The episode concludes with a discussion of investor behavior, with McCullough urging listeners to detach from narratives and emotions, and instead rely on process, data, and adaptability in an increasingly fast-moving market environment.

Finally, Collin and Liz Ann look ahead to next week’s upcoming macroeconomic indicators and key data releases.

To keep up with Keith McCullough, you can follow him on X: @KeithMcCullough

On Investing is an original podcast from Charles Schwab. For more on the show, visit schwab.com/OnInvesting.

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