Dear ETF Pro Plus Subscriber,

Welcome back!

The current lineup of ETFs is as follows:



ETF Pro Plus: November Update (Q4 2023) - Bullish on Bear Cartoon

THEME 1: USA #Quad3 Stagflation

Quick updates:

  • The US Consumer is hitting a #Quad3 Stagflation wall.
    • September Headline CPI accelerated by 50bps M/M to +3.7% Y/Y.
    • September Headline PPI accelerated by 60bps M/M to +2.2% Y/Y.
  • The Commodities (and Bond) Market have been signaling INFLATION Re-Accelerating since July.
  • Natural Gas has inflated +21.0% in the last 3 months.
  • Oil (WTI) has inflated +8.7% in the last 3 months.

Below is the summary of theme #1 from our 4Q23 Quarterly Macro Themes:

Easy CPI comps are fully rearview, Headline & Supercore Inflation are reaccelerating, Demand growth is back to Trend deceleration following the countertrend bounce in July and the inimical margin-negative Quad 3 duo of Demand ↓, Prices ↑ has now defined the prevailing reality domestically since late July. Meanwhile, the global/local industrial-mfg recession remains entrenched, the consumer retrench continues to intensify and the list of income/discretionary consumption shocks in queue continues to layer as “the Convergence” thesis we promulgated in 2Q remains on time and on script. We’ll detail where we are on that Convergence timeline, how long we expect the Stagflationary mojo to persist and how we’ll risk manage & allocate inside the current, idiosyncratic version of #Quad3.

ETF Pro Plus: November Update (Q4 2023) - NOVtheme1 1

ETF Pro Plus: November Update (Q4 2023) - NOVtheme1 2

THEME 2: The Big (G) - Deficits & Debt

Quick updates:

  • Federal Debt has now reached $33.6+ Trillion.
  • Big-time government spending was the hero of 1H23 but a slowing rate of growth in government spending is coming in 1H24.
  • GDP growth and payrolls benefitted from this explosion in government spending as well.
  • Bipartisan Infrastructure Law, CHIPS & Science Act, and Inflation Reduction Act account for ~$2T in government spending over next 10 years.

Below is the summary of theme #2 from our 4Q23 Quarterly Macro Themes:

Federal spending saved Headline GDP in 1H with government sponsored reindustrialization initiatives supporting some of the highest nonresi investment contributions to GDP in 40 years. We’ll outline the probable trajectory of the fiscal impulse and the attendant growth/inflation/rates implications, discuss whether we’ve transitioned to a new secular regime of fiscal dominance and detail the multi-duration risks and allocation considerations associated with the vertical ascent in deficits/debt/interest expense nested within the secular evolution of Fourth Turning dynamics.

ETF Pro Plus: November Update (Q4 2023) - NOVtheme2 1

ETF Pro Plus: November Update (Q4 2023) - NOVtheme2 2 

THEME 3: LONG JAPAN/India vs. Short European Recession

Quick updates:


  • The Recession in Europe is taking hold.
    • Germany Q3 GDP clocks in at -0.3% Y/Y, which is a slowing from Q2 at 0.0%.
    • Both Austria and Sweden GDP also slowed to -1.2% in Q3.
    • Belgium CPI slowed to +0.4% Y/Y.
    • Germany CPI slowed to +3.8% Y/Y.
  • Eurozone Economic Sentiment in October slows to 93.3, which is the 6th sequential deceleration and lowest level since November 2020.
    • All economic subsectors were negative.
  • England has decided to hold rates, and does not rule out further rate hikes in the future. Governor Bailey in recent comments has been explicit that “no rate cuts are on the horizon with inflation still too high and wage growth levels inconsistent with meeting its inflation aims” -> hawkish pause.


  • Japan’s Q3 Tankan Manufacturing and Non-Manufacturing Indices both accelerated to +9 and +27, respectively.
  • Although still negative, Japan Machine Tool Orders accelerated for the 4th straight month to -11.2%.
  • After decades of trying to escape deflation, core inflation in Japan has grown to 4.3%.
    • Note: Amidst weakening signal strength on Keith's VASP we have removed all Japanese equity exposure from ETF Pro
  • Domestic demand in India is powering acceleration in manufacturing sector.
  • India has returned to their pre-pandemic core inflation regime.
  • India has seen both manufacturing & services PMI remain above 50 while other Asian economies have struggled.

Below is the summary of theme #3 from our 3Q23 Quarterly Macro Themes:

With growth expected to land in the top-half of the Quad Matrix (accelerating) in 4Q23 for both Japan and India, and with the signal incrementally confirming this trajectory, we continue to favor these international equity exposures on the long side. Accommodative monetary policy is powering real growth acceleration through heightened external demand with both exports and the wave of post-pandemic tourism benefitting from a weaker yen. Despite the double impact of a strengthening dollar and energy reinflation adding new risks to the energy / food importer's loose monetary policy stance, Japan is, for now, leaning into above-target inflation after decades of deflationary struggles. Meanwhile, India is enjoying a comparatively strong fundamental setup with buoyant domestic demand fueled by government spending, moderated commodity prices (excluding Oil), and strong credit growth. Lastly, real growth on the European continent is poised to slow through at least 4Q23 as economic gravity imposes itself through the dual vectors of sticky-high inflation (worsened by recent dollar strengthening and energy reinflation) and credit tightening as the global industrial recession continues to focus much of its impact in Europe with manufacturing activity hurting from weakened global goods demand and the new cost-of-capital reality terrorizing Capex plans worldwide.

ETF Pro Plus: November Update (Q4 2023) - NOVtheme3 1 

ETF Pro Plus: November Update (Q4 2023) - NOVtheme3 2


ETF Pro Plus: November Update (Q4 2023) - G20 NOV

ETF Pro Plus: November Update (Q4 2023) - Emerging NOV

Best of luck out there,
Team Hedgeye

Below is an updated list of the 36 current ETF Pro Plus tickers. Keep reading for an overview of our thesis for each of these current ETFs, along with what we’ve added and removed since the last newsletter.

New users should definitely check out the Appendix for a brief primer on our Macro process and how we select (and remove) the exposures in ETF Pro PlusReview last month's edition of ETF Pro Plus.


ETF Pro Plus: November Update (Q4 2023) - bullish

ETF Pro Plus: November Update (Q4 2023) - bearish2


ETF Pro Plus: November Update (Q4 2023) - added

ETF Pro Plus: November Update (Q4 2023) - removed


ETF Pro Plus: November Update (Q4 2023) - commodities

With inflation re-accelerating we have added US Oil (USO) to our portfolio to capitalize on this trend. We expect oil supply to remain tight for the foreseeable future, and geopolitical risks in the Middle East and North Africa could support a rise in oil prices. Our investment process suggests that we should go long oil, and we will execute on that recommendation.

Long positions in USO have been outperforming long positions in IWM. Stocks have been good assets to short, and commodities such as oil, gold, and others have been good assets to hold long. Investors are moving away from equities and towards commodities.

According to our asset class performance chart, commodities outperform during periods of high inflation. We are currently in a Quad 1 environment, and we are forecasting a transition to Quad 3 or 4 in 2024. Commodities are expected to outperform in this environment, and we have added Commodity Index (DBC).

We removed Gold (GLD) and Physical Gold (AAAU) as these broke down based on our #VASP signal.

 ETF Pro Plus: November Update (Q4 2023) - 10.24


ETF Pro Plus: November Update (Q4 2023) - domestic equities 2 

We are staying short of Russell 2000 (IWM) as it has crashed -33% since its 2021 peak. It is down -2.6% in the past week and down -16.3% in the past 3 months. IWM continues to underperform in the Quad 3 and 4 setup looming, and our Short has been paying off.

The retail sector is volatile, and during the economic downturn mixed with re-acceleration in inflation, Retail (XRT) is a short facing several challenges. The labor shortage / slowdown is expected to continue based on the consumer tightening we have witnessed. Despite the reported increase in GDP, consumers are facing mounting pressure with student loan payments kicking back in recently. This surprisingly affects many high-income earners, who contribute greatly to the retail sector. We remain bearish on XRT entering a reported recession in the quarters to come. These headwinds affect FIRR (Financials, Industrials, Retail, and Real Estate) to a great degree, so we remain bearish Regional Banks (KRE), Real Estate (XLRE) and Industrials (XLI) as well.

The S&P Equal Weight is down over 4% YTD, and the #MM7 Magic is beginning to wear off. S&P 500 (SPY) is headed for a slowdown after being up nearly 10% this year, so we remain Short.

Utilities (XLU) are interest rate sensitive, and with yields breaking out to nearly 5%, we are short any rate sensitive sectors. As we head into the Quad 3 and 4 environment of 2024, Consumer Staples (XLP) are also headed for a correction. The consumer is being squeezed, as mentioned above, and likely to forego discretionary items for essentials.

We've added two long exposures to offset the short side, Insurance (IAK) and Energy (PSCE). Inflationary pressures have continued to pump energy allocations as the Fed is seriously lacking in controlling the bond market and fulfilling their promise of reaching 2% inflation. In addition to a negative signal on Keith's VASP, rising energy prices are also behind our short Airlines (JETS) position.

Managed Futures (CTA) have historically shown low correlation to traditional asset classes such as stocks and bonds. This means that they can help to reduce the overall volatility of a portfolio. CTAs can take long positions in commodities and other assets that are expected to benefit from rising prices. They can also go short on assets that are expected to decline in value. This flexibility can allow CTAs to generate positive returns even in periods of high inflation or market volatility.

ALPS Alerian MLP (AMLP) offers a diversified exposure to the master limited partnership (MLP) sector, which is expected to benefit from strong commodity prices. MLPs are primarily engaged in the transportation, storage, and processing of commodities such as oil, natural gas, and petroleum products. As a result, their earnings are directly tied to commodity prices. With commodity prices at multi-year highs, MLPs are well-positioned to generate strong cash flow in the coming quarters.

High interest rates also explain our Property & Casualty Insurance (KBWP) long. This leads to higher investment income for Property & Casualty insurance companies. An aging American population, and other demographic factors covered by analyst Neil Howe, bode well for KBWP.

Natural Gas has been bullish on our Risk Ranges, and has inflated +21.9% in the last 3 months. Geopolitical tension in the middle East and Europe has disrupted the supply, and our #VASP signal agrees that First Trust Natural Gas (FGC) is a long right now.

We removed Semiconductors (SMH) as they broke down based on our #VASP signal.

ETF Pro Plus: November Update (Q4 2023) - 10.3.23 


ETF Pro Plus: November Update (Q4 2023) - fixed income

As Keith McCullough said in a Real-Time Alert on October 31, we've been bearish on both The Cycle and High Yield Corporate Bonds (HYG) for going on 23 months. We continue to like the HYG short and High Yield Bonds (JNK) as beneficiaries of the continually widening High Yield OAS Spread (+50 bps in October). These serve as a fulcrum point for our Short Credit bias.

  • While HYG and JNK are thematically similar in tracking below-investment grade corporate credit, there are a few slight different in their investment profiles:
    • HYG has less BBB rated bonds and more BB, but also less B and less CCC rated bonds (HYG's quality is concentrated in the BB's, while JNK is a bit more spread across the credit spectrum)
    • HYG has a higher expense ratio
    • HYG is far more liquid (higher daily average volume)
    • HYG has a longer effective duration
    • HYG has over double the AUM

Yielding north of 5%, we continue to be long the US Treasury 3 Month (TBIL) and US Treasury Floating Bond Rate (TFLO) as the Bond Market continues to predict higher inflation.

Income Short Maturity (BUXX) provides investors with exposure to short-term, high-quality bonds while minimizing volatility. Due to their shorter duration, short-term bonds have less time to be impacted by changes in interest rates.

Interest Rate Volatility & Hedge (IVOL) can also be used as a hedge against inflation. Inflation can erode the purchasing power of fixed-income investments, such as bonds. IVOL can help to mitigate this risk by providing investors with exposure to assets that tend to perform well in inflationary environments.

We are also short Senior Loans (OXLC) as credit continues to tighten.


ETF Pro Plus: November Update (Q4 2023) - emerging market

We continue to lean bearish on Hong Kong (EWH) as Keith’s #VASP signal confirms. Traffic in broader Asia has faltered with China taking the lead, and as a result EWH is bearish trend and remains a Short.


ETF Pro Plus: November Update (Q4 2023) - Nov foreign exchange

The US Dollar (UUP) generally has a positive correlation with rates. This allocation goes along with our thesis of getting long inflation, which was confirmed by the Fed rate pause. Remember, the real score in The Game = Dollar Up, Rates UP … because… Inflation has been Re-Accelerating.

We removed Canadian Dollar (FXC) as it broke down based on our #VASP signal.


ETF Pro Plus: November Update (Q4 2023) - global equities 2

Uranium (URA) and Uranium+Nuclear Energy (NLR) have the highest absolute performance since being added as longs this summer. 

Instead of chasing performance and "buying the laggards," if you want to be long US "Stocks," you’re much better off being long the sector styles that are explicitly linked to Inflation Accelerating, including energy stocks Oil & Gas Exploration (XOP).

We removed Energy (XLE) as it broke down based on our #VASP signal.


ETF Pro Plus: November Update (Q4 2023) - Nov intl equities

Domestic demand, business confidence and industrial production are accelerating in India (which is why we like tickers like INDA and SMIN) and we see that reflected in our forecast with #Quad2 predicted through end of year.

The European continent, having been spared from an energy crisis this past winter, is increasingly under the weight of elevated inflation, torpid manufacturing activity, tightening credit conditions, and renewed central bank hawkishness. More broadly, the confluence of weakening global demand concentrated, for now, within the goods economy and the new cost-of-capital reality terrorizing Capex plans worldwide; the #Quad4 industrial recession remains a persisting reality. In light of these economic realities we like France (EWQ), Sweden (EWD), Germany (EWG), Greece (GREK) and Austria (EWO).

We removed India (INDY), JPX-Nikkei (JPXN), Japan Value (EWJV), Japan (EWJ) and United Arab Emirates (UAE) as they broke down based on our #VASP signal.



No current high-conviction ideas.


We find two factors to be most consequential for forecasting future financial market returns: economic growth and inflation. We track both on a year-over-year rate of change basis to better understand the big picture then ask the fundamental question: Are growth and inflation heating up or cooling down?

From there, we get four possible outcomes, each of which is assigned a “quadrant” in our Growth, Inflation, Policy (GIP) model and the typical government response as a result (neutral, hawkish, in-a-box or dovish): Growth accelerating, Inflation slowing (QUAD 1); Growth accelerating, Inflation accelerating (QUAD 2); Growth slowing, Inflation accelerating (QUAD 3); Growth slowing, Inflation slowing (QUAD 4).

ETF Pro Plus: November Update (Q4 2023) - Quad NOV

After building this base of knowledge, we can now select what we like and don’t like based on our historical backtesting of the different asset classes that perform best in each of the four quadrants. The chart above shows the U.S. economy in #Quad1 in 3Q23 and #Quad4 in 4Q23. However, forecasts via our predictive tracking algorithm over a monthly periodicity, suggests the U.S. economy is more stagflationary. We expect September and October inflation reports coming in hot.

Below is a chart that lays out precisely what we like and don’t like when an economy is in each of the four quadrants. This chart should help you make better investment decisions, even outside our recommendations in ETF Pro Plus. (For more on our Macro team's overall research process, click here to read our detailed "Macro Playbook.")

ETF Pro Plus: November Update (Q4 2023) - QR NOV