Posted:November 4, 2026
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Constructing diversified portfolios in our boom-and-bust economy often feels like steering a ship during a storm at sea. The destination does not change, but the conditions do, and a captain who ignores the weather is more likely to be caught off guard by changing conditions. Charles Gave’s version of The Four Quadrants Framework builds on earlier growth-and-inflation grids and measures each axis using market prices, providing investors with a way to read the economic weather.
The Four Quadrants Framework is anchored in market-based relative signals to guide asset allocation. Instead of relying on revised government data or trying to predict the economic weather, it uses two objective, market-driven questions. Are businesses turning energy into profit? Is the dollar holding its value?1
Question 1: Are Businesses Turning Energy into Profit (The Growth Axis)?
Market Signal: The ratio of the S&P 500 Index to WTI Crude Oil, compared against its 7-year moving average.
Underlying Logic: According to Gave, an economy is, at its core, energy transformed into goods and services.2 When the stock market generates value faster than the cost of its primary industrial input (energy), output is expanding efficiently. When energy costs outpace stock prices, profit margins tend to compress, and growth tends to stall.
How to Read the Signal:
Question 2: Is the Dollar Holding its Value? (The Currency Axis)
Market Signal: The price of gold relative to the total return of a 10-year U.S. Treasury, compared against its 7-year moving average.
Underlying Logic: Sovereign government bonds are supposed to serve as the ultimate safe-haven store of value. However, when fiscal deficits rise and central banks print money, paper currency loses purchasing power. Gold serves as the standard of value, the yardstick against which paper claims are tested. If U.S. Treasuries have outpaced gold, the bond market has been a proper store of value. If gold has outpaced Treasuries, the currency is being debased.3
The Four Quadrants Outcome
The answers to these fundamental questions yield four quadrants, or four distinct macroeconomic regimes:
Figure 1: The Four Quadrants
Source: Genesis Wealth Planning. Adapted from Browne, Dalio, and Gave; see references.1,4,5
Four Economic Regimes
Measuring asset prices purely in fiat currency often creates a monetary illusion. By evaluating stocks against energy (oil prices) and U.S. Treasury Bonds (paper debt) against gold, these two questions strip away currency inflation to show whether your portfolio is building true wealth or merely tracking paper devaluation.
In Timeless, I describe the four environments this way:
Deflationary Boom/Prosperity: This economic environment is typical and one in which capitalism thrives. Inflation is low but positive. Corporate profits are substantial, confidence is high, and economic growth booms. The environment is ideal for stocks, real estate, and bonds. Essentially, any asset with a “long duration” does well. Cash goes up in real terms, and gold tends to underperform.
Inflationary Boom: This environment occurs when prices and monetary inflation rise rapidly. Historically, this scenario generally coincides with wars and deficit spending. Government debt levels are high, and the money printer is often in overdrive. Gold is the best asset to own in this environment. Commodities and real estate perform well in tandem with stocks. Cash tends to move sideways, and bonds often perform the worst.
Inflationary Bust/Recession: This environment is challenging for almost every asset class as stagflation sets in with high inflation, rising interest rates, and low growth, typically leading to an economic recession and declining stocks and bond prices. Gold and cash provide ballast for a diversified portfolio.
Deflationary Bust: This environment occurs when prices and interest rates fall. It is the single most disliked environment by central bankers. Long-duration bonds thrive, and cash also performs well. As interest rates approach the zero-bound, gold often performs well, as the opportunity cost of holding gold, which produces no yield, diminishes. (Hancock, 2025, p.203)6
With these definitions in mind, here is where the framework stands today.
Current Reading
As of the end of September 2026, the framework reads “inflationary boom” (upper-right quadrant) and has remained so since November 2023. At 35 months, this is the longest unbroken inflationary boom in the dataset. Of the two axes, the growth axis is closer to a crossing. The S&P 500-to-WTI ratio stands about 11% above its 7-year moving average, down from roughly 30% in August, as oil prices have risen amid the U.S.-Iran conflict and disruption to Middle East supply. The currency axis sits well above its 7-year moving average, so a reversal there would require a much larger shift.
Question 1: Are Businesses Turning Energy into Profit? YES (+1)
Stocks continue to rise faster than oil prices, with AI-related capital spending a major catalyst for recent gains. Energy transformation remains efficient, keeping us on the Right (boom) side of the quadrant.
Figure 2: Boom or Bust
Sources: Genesis Wealth Planning; Shiller; BP; FRED; EIA. Framework adapted from Gave (2024). Data through September 2026 7-10
Question 2: Is the Dollar Holding its Value? NO (-1)
At present, the gold-to-Treasury ratio sits well above the 7-year moving average, signaling that paper currency and sovereign debt are losing purchasing power. High debt levels and structural fiscal deficits are the main culprits keeping the U.S. in a highly Inflationary (Top) environment.
Figure 3: Inflation or Deflation
Sources: Genesis Wealth Planning; Board of Governors of the Federal Reserve (FRED, GS10); World Bank Commodity Markets (“Pink Sheet”). Gold price divided by a calculated total return index for a 10-year U.S. Treasury, April 1953 = 100, monthly through September 2026. Framework adapted from Gave (2024).11,12
How an Inflationary Boom Ends
At some point, this regime reading will change. While it’s difficult to predict which quadrant will come next, let’s discuss the two quadrants that are one signal away from today’s reading.
Inflationary Bust (upper left)
The first and most likely outcome is a shift toward an inflationary bust. The classic example of this regime took place from 1973 to 1982. The United States closed the gold window in 1971, and oil prices surged, creating the perfect storm for an inflationary bust economy. Today, with gold in a bull market, an oil supply shock from the war in Iran looks to be the most likely way to push us towards an inflationary bust.
Deflationary Boom (lower right)
A second path towards a deflationary boom would require central bankers and policymakers to wake up and cause a “soft landing.” This requires some combination of a growth and productivity miracle, fiscal discipline, geopolitical peace, and a normalization of price and monetary inflation. This seems like a tall task for all parties involved.
Deflationary Bust (lower left)
A move to the lower left, a deflationary bust, would require both signals to reverse simultaneously. In other words, a shift towards this quadrant is furthest from today’s reading.
Strategic Asset Allocation: Our Core Philosophy
Our investment philosophy is grounded in creating diversified, enduring portfolios designed to build long-term wealth and preserve purchasing power. Drawing on the structural insights from Charles Gave’s Four Quadrants, Ray Dalio’s All-Weather Strategy, and Harry Browne’s Permanent Portfolio. We believe portfolios should be diversified and hold a mix of cash, gold, stocks, and bonds.
The core asset classes of a diversified portfolio perform differently in varying market and economic conditions. The specific percentage allocation, type, and vehicles for each asset class will vary with each individual. Every person is unique, and a portfolio should reflect one’s personal goals, risk preferences, and objectives. There is no one-size-fits-all portfolio. However, holding a diversified portfolio across these asset classes may help investors remain better prepared for a range of economic environments.
Tactical Asset Allocation
While a strategic asset allocation provides long-term balance to a portfolio, tactical asset allocation allows us to adjust weightings based on current economic conditions. As discussed, we’re in an inflationary boom. Gold generally does very well in this quadrant. In the stock market, value companies with pricing power, energy companies, and emerging markets all tend to hold up well. Holding cash and short-duration bonds can provide ballast if risk assets falter. Further, short-term yields remain attractive. While longer-term bond yields have risen to more attractive levels, long-dated paper bonds can do poorly in an inflationary environment.
We’ll continue to monitor these important ratios and the regime we’re in for asset allocation and portfolio management.
References
DISCLOSURES & INDEX DESCRIPTIONS
For disclosures and index definitions, please click here.
