“A trophy carries dust. Memories last forever.”
- Mary Lou Retton
I remember Mary Lou Retton winning Gold in Los Angeles like it was yesterday. It was the summer of 1984 and I was 9 years old. We only had a few TV channels back then. I think I thought I was going to marry her too.
Turns out that instead of marrying Mary Lou, I married Macro (and Laura).
My 7 year old daughter Lucy (who loves gymnastics) had one of those nights watching Suni Lee win Gold for her country last night too. My Lou-lou didn’t care about the side shows – she just loved watching her win.
Back to the Global Macro Grind…
Were you Long Commodities and Short China in July? That was a big macro win.
Despite all of the yip yap about disinflation and deflation, Commodities, as an Asset Class, inflated to new Cycle Highs of 221 on the CRB Commodities Index. You can call it transitory or a TRENDING long. Fact is it got you paid, again.
The upside down of that Commodities inflation (which is THE leading indicator in our proprietary US INFLATION Nowcast model) is the US Dollar Index closing out the 1st month of #Quad3 in Q3 at its lows for the month.
If you still have Old Wall friends who use 50 & 200 day Moving Monkeys as their leading indicators, July’s lower-LONG-TERM-high for the US Dollar was the 4th #Fail @Hedgeye TREND resistance since we went bearish on it in JUN of 2020.
Since some people wish I was as “short-term” as they behave, here are some longer-term Full Investing Cycle wins:
A) Short US Dollar since JUN 2020
B) Long Commodities since JUN 2020
When The Cycle ends isn’t up to me “making a call” on that. It’s up to my friend Floki and the Macro Gods (or, if you are more mathematically than religiously inclined, the Singularity of The Signaling Process!).
You see, I don’t tell The Cycle or The Risk Range™ Signals what to do. I do what they do.
Thanking my God, many of our competitors don’t do that. They try to tell you what markets should do using some single factor model (like the simple moving average of price momentum or “valuation”) as their confirmation bias.
The teams winning Gold at both the Olympics and in macro markets this month (we went from Bearish on Gold in SEP 2020 to Bullish here in JUL 2021) don’t do the Linear Econ thing. We do the multi-factor, multi-duration thing.
Other than Gold’s recent breakout confirming the #Quad2 to #Quad3 US economic Phase Transition, what’s up?
A) QUALITY, as a US Equity Factor Exposure, was +0.9% yesterday to +4.3% in July
B) SMALL CAP, as a Factor Exposure, was +0.4% yesterday to down -1.6% in July 30, 2021
By “quality” I mean quality balance sheets or LOW DEBT to EV (enterprise value)… or Suni Lee’s Hmong family cheering section on Zoom last night (so good, Lou-lou, so good!).
Like Smaller Caps, Low QUALITY, or HIGH DEBT to EV companies in the SP500, are also down -1.7% for July. *Power User Note: these Factor Exposures are scored as Top vs. Bottom Quartiles of SP500 companies.
And, again, two of the most obvious Asset Allocation pivots when going from #Quad2 to #Quad3 are going from Short to Long Gold and from Long to Short (or underweight) Levered Small Caps.
Over the longest of terms (your investing life), having both the #preparation and #patience to execute on your #process are some of the most important things. If you want to have the resilience to win at the highest level, that is.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets:
UST 10yr Yield 1.19-1.42% (bearish)
UST 2yr Yield 0.18-0.24% (bullish)
SPX 4 (bullish)
RUT 2150-2267 (bearish)
NASDAQ 14,508-15,015 (bullish)
Tech (XLK) 149.01-156.30 (bullish)
REITS (XLRE) 45.47-46.90 (bullish)
Shanghai Comp 3 (bearish)
Nikkei 27,001-28,194 (bearish)
VIX 15.32-20.81 (bearish)
USD 91.66-92.83 (bearish)
Oil (WTI) 68.20-75.95 (bullish)
Nat Gas 3.71-4.16 (bullish)
Gold 1 (bullish)
Copper 4.31-4.68 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
