Growth, inflation, liquidity and policy: a regime framework
Four axes are more useful than one market label because they reveal the conflicts that drive cross-asset dispersion.
Why four axes
Growth and inflation describe macro outcomes. Liquidity and policy describe financing conditions and the official reaction. They interact but are not interchangeable. Growth can slow while liquidity expands; inflation can fall while policy remains restrictive; a central bank can ease while long yields rise. Keeping the axes separate prevents one label from doing too much work.
Measure direction and level
For growth, combine activity levels with breadth and momentum. For inflation, distinguish headline shocks from sequential core pressure and expectations. For liquidity, define the actual balance sheets and funding channels included. For policy, separate the current stance, expected path and fiscal impulse. A regime state should show both the label and its drivers.
Map conditional tendencies
Growth up and inflation down often supports risk assets and duration, but starting valuation and policy can dominate. Growth down and inflation up is difficult for both stocks and nominal bonds, yet commodity exposure and currency response vary with the source of the shock. Historical tendencies are priors—not promises.
Watch transitions, not quadrants
The largest repricing can occur during transition, before a clean quadrant is visible. Monitor diffusion, sequential rates and market confirmation. Preserve the date the regime assessment changed. Otherwise an analyst can move the label after price and claim the signal existed earlier.
Use the framework
Ask what changed on each axis, which theme received new evidence, and what the market already prices. Then build at least two alternative paths. The framework is successful when it sharpens questions and exposes conflicts, not when it produces one all-purpose trade.