“It is well to be up before daybreak, for such habits contribute to health, wealth, and wisdom.”
- Aristotle
Good morning from Louisville, Kentucky. It’s been a while since I’ve been on a business trip, but I’m excited to be on the road this morning. Welcome to another Macro Monday @Hedgeye!
For those of you who are new to our Global Macro Risk Management #process, welcome aboard. For those of you wily veterans of getting up early and measuring and mapping all of macro in ROC (rate of change) terms, let’s do this.
As a reminder, our weekly reviews are multi-duration (TRADEs and TRENDs) and multi-factor.
Back to the Global Macro Grind…
As usual, let’s start with what happened in the Global Currency market last week (hint: #Quad2):
- US Dollar Index was down another -0.3% and down for the 4th week in the last 6, showing no signs of #Quad2 abating
- EUR/USD was up another +0.3% last week to +1.2% in the last month and remains Bullish TRADE and TREND @Hedgeye
- Canadian Dollar continued higher, appreciating another +0.3% last week vs. USD to +3.5% in the last month
- GBP/USD was up another +0.4% last week to +1.6% in the last month and remains Bullish TRADE and TREND as well
- Hungarian Forint appreciated +2.3% vs. USD last week to +5.4% in the last month = Bullish TRADE and TREND
- Icelandic Krone appreciated +1.6% vs. USD last week to +2.6% in the last month = Bullish TRADE and TREND
Yep, The People of Hungary and Iceland are happy about their purchasing power appreciating. I googled a bunch of them and can’t, for the life of me, find any of them complaining about their currency appreciation being “transitory.”
If you made a major asset allocation to something like Bitcoin, however, your purchasing power just crashed. Bitcoin was down -28.3% last week crashing to -35.9% in the last month alone. Real currencies don’t do that.
That’s why I’ve always called Bitcoin what it is: a Commodity (or an asset that trades like one). That’s because it has the volatility attributes of Commodities. That’s also why Volatility Adjusting your Asset Allocation #process is critical.
While the overall Commodities Index corrected last week, there was still plenty of real-world #InflationAccelerating:
- CRB Commodities Index corrected -1.2% last week to +3.7% and +6.5% in the last 1 and 3 months, respectively
- Oil (WTI) corrected -2.7% last week to +3.8% and +9.4% in the last 1 and 3 months, respectively
- Copper corrected -3.7% last week to +4.5% and +10.0% in the last 1 and 3 months, respectively
- Corn inflated +2.5% last week to +8.7% and +23.7% in the last 1 and 3 months, respectively
- Lumber inflated +4.5% last week to +25.4% and +87.2% in the last 1 and 3 months, respectively
- Coffee inflated +3.5% last week to +11.8% and +14.6% in the last 1 and 3 months, respectively
Why do I care about the last 1 and 3 months, respectively?
That’s simple – because The Machine does. It perpetuates the flow and especially cares when immediate-term @Hedgeye TRADE Signals (3 months or less) lead to intermediate-term TREND Phase Transitions.
Currently The Singularity of The Signaling #Process sees nothing to be concerned about in the FX, Rates, or Commodities markets when it comes to the #1 Question we get (i.e. “when does #Quad2 end?”).
If it did, USD would be breaking out and both Commodities and Rates would be breaking my TRADE levels.
In Global Equities, last week was an interesting cocktail of #Quad Reminders:
A) NASDAQ was +0.3% on the week, recapturing @Hedgeye TREND support – let’s see if it holds
B) US REITS (XLRE) were +0.8% on the week to +10.1% in the last 3 months and remain Bullish @Hedgeye TREND
C) European Stocks (EuroStoxx600) were up another +0.4% on the week and remain Bullish @Hedgeye TREND
D) Russian Stocks (RTSI) were up another +1.3% to +7.1% in the last 3 months and remains Bullish TREND
E) Chinese Stocks (Shanghai Comp) were down -0.1% to -5.7% in the last 3 months and remain Bearish TREND
China is the only major country in the G-20 that currently is not in #Quad1 or #Quad2. It’s in #Quad3. All of the major countries in Europe remain squarely in #Quad2. That’s another major reason why the US Dollar was down, again, last week.
Immediate-term @Hedgeye Risk Range with TREND signal in brackets:
UST 10yr Yield 1.59-1.73% (bullish)
SPX 4071-4233 (bullish)
RUT 2140-2277 (bullish)
NASDAQ 13,013-13,736 (bullish)
Tech (XLK) 131.28-138.92 (bullish)
Energy (XLE) 51.28-54.94 (bullish)
Shanghai Comp 3 (bearish)
DAX 15057-15578 (bullish)
VIX 15.87-26.46 (bearish)
USD 89.44-90.70 (bearish)
EUR/USD 1.205-1.227 (bullish)
GBP/USD 1.399-1.423 (bullish)
CAD/USD 0.82-0.84 (bullish)
Oil (WTI) 61.92-67.44 (bullish)
Gold 1 (bearish)
Copper 4.46-4.84 (bullish)
Bitcoin 32,511-46,491 (bearish)
Best of luck out there this week,
KM
Keith R. McCullough
Chief Executive Officer
