This issue seems to occur when using Cook on the fly on a Material that is branched on the Static switch. This issue also seems to occur on the console.
Regression = Yes, issue is not reproduced //UE4/Release-4.26 at CL 15973114
1. Open the attached project.
2. Launch with Cook on the fly from Project launcher
Materials using Static swtich are rendered with Grid material.
Renders correctly when packaged.
There's no existing public thread on this issue, so head over to Questions & Answers just mention UE-134169 in the post.