Earlier today the Hedgeye Macro Team, led by CEO Keith McCullough, hosted its quarterly Macro Themes conference call in which it detailed the THREE MOST IMPORTANT MACRO TRENDS it has identified for 3Q16 and the associated investment implications.
WATCH THE REPLAY BELOW
For the audio replay click here
To access the presentation materials click here
Q3 2016 MACRO THEMES OVERVIEW:
- #ProfitCycle: Embedded in the SPY’s lofty multiple are consensus estimates that forecast a return to positive earnings growth in Q2 and Q3, as well as a material ramp to near double-digit growth in Q4 – effectively implying Q1 was the end of the domestic corporate profit recession. Conversely, the confluence of our top-down and bottom-up analysis suggests earnings growth is likely to reach new lows in the Q2/Q3 timeframe. Moreover, earnings in over-owned sectors like Consumer Discretionary, Financials and Health Care are at risk of meaningful surprises to the downside due to the ongoing #LateCycle slowdown in consumption and employment growth.
- #ConsumerCredit: At the end of every economic expansion, the preponderance of investors have seemingly forgotten that #TheCycle actually does cycle. But as recent commentary from Synchrony Financial (SYF) and CarMax (KMX) has alluded to, the domestic consumer credit cycle has inflected to the downside and our work suggests said deterioration is likely to remain ongoing for at least the next few quarters. Moreover, this deterioration has wide-ranging implications for investors.
- #EuropeImploding: Brexit happened, but which other countries may leave the EU? We’ll outline the countries that we believe have the largest political risk and quantify Europe’s cyclical and structural growth and inflation headwinds within our ongoing theme of #EuropeSlowing. We’ll present why we believe fundamentals can fall further and why the Euro may hit new lows.
Kind regards,
-The Hedgeye Macro Team
