A Q4 #Acceleration, It Was

“It wasn’t a piece of hardware or a bit of software. It wasn’t even a product. It was a man.”
- Adam Grant 

That’s how Grant introduced The Trillion Dollar Coach, Bill Campbell. Happy New Year and a big thank you, Hedgeye Nation, for sending me that book. I read it over the holidays and learned a lot about coaching at the highest level.

Bill Campbell was an Ivy League Football Captain. Then “he was a football coach turned sales guy. Yet somehow Bill had become so influential that he went on a weekly Sunday walk with Steve Jobs…

And the Google founders said they wouldn’t have made it without him.” His story only gets better as you dig into the details. Who’s your coach? Are you coachable? Let’s have a great 2022 season!

Back to the Global Macro Grind…

Welcome to the 1^st Macro Monday @Hedgeye of 2022. It isn’t time to “make 2022 predictions.” That’s a waste of our Full Investing Cycle time. It’s time to grind. It’s time to measure and map The Cycle.

Let’s start with what the Global Currency market did last week:

1. US Dollar Index corrected -0.4% last week but remains Bullish on both our TRADE and TREND durations
2. EUR/USD bounced +0.5% last week but remains Bearish on both our TRADE and TREND durations
3. Yen was down another -0.6% vs. USD last week and remains Bearish TRADE and TREND
4. GBP/USD was +1.1% getting just above @Hedgeye TRADE resistance but remains below TREND resistance
5. Russian Ruble lost another -1.5% vs. USD last week to -3.1% in the last 3 months and remains Bearish TREND
6. Turkish Lira’s crash continued, down -19.7% vs. USD, crashing -33.3% in the last 3 months

So the “story” (which is driven by The #VASP Signals, not narratives) from the FX market remains relatively new on the Energy front. Russia’s currency is breaking down as inflation expectations for Commodities do.

Turkey’s GROWTH and INFLATION story isn’t new. It’s a bloody mess. And we remain bearish of it in TUR terms.

Commodities markets, in some spots bounced to lower-highs – in others, not so much:

1. CRB Commodities Index underperformed our fav Equity markets closing +0.6% on the week
2. Oil (WTI) had a better week, reflating +1.9% and recapturing TREND support of $74.26 (we’ll see if that holds)
3. Coffee disinflated -2.2% last week to -2.7% in the last month after breaking @Hedgeye TRADE support
4. Wheat disinflated -5.4% last week to -2.1% in the last month after breaking @Hedgeye TRADE support
5. Gold appreciated +0.9% last week to +2.9% in the last month after breaking out above TREND resistance! 

Don’t worry. I don’t think of Gold as a Commodity. I just put it there because I felt like having some flair in my life this morning. As I explained prior to my vaca, I am buying Gold on down days with the danger of #Quad2 coming back pretty low.

For those of you who Remember The Titans and/or what happened in #Quad2 throughout The Inflation #Accelerating Cycle that started in Q2 of 2020:

A) Commodities were better Asset Allocations than either Equities or Credit
B) Gold sucked

Now that the market is pricing in Peak Inflation, Peak Long-term Yields, and Peak Fed Hawkishness, Gold can recover from covid and take a portfolio position over my former Commodity Longs like Coffee (JO).

Oh, I know. I heard. Did you hear? You know a lot of people who got covid? Yeah.

I know a lot of people who shorted US GROWTH #Accelerating exposures on the covid re-acceleration narrative. Remember the “Evergrande contagion” narrative? Wow there was a lot of #noise in 2021.

If you stayed The Cycle’s course and bought either #Quad1 for Q1 in the USA (or Narrow #Quad4 where everything goes up, other than long-term bond yields) or #Quad2 in Europe, you killed it last week:

1. Yield Sensitive Utilities (XLU) were up +2.7% on the week to +8.8% in the last month alone
2. #Quad1 Winner, Basic Materials (XLB) were up +2.6% on the week to +7.0% in the last month
3. French Stocks (CAC40) were up another +0.9% on the week to +6.4% in the last month

You don’t like my French? C’est la vie du Coach Mucker, eh.

Swiss Stocks, which are still #1 in European Equity Risk Range™ Signal Strength terms (France is still ranked #2) were up another +0.7% to +5.9% in the last month too.

Yeah, there are still a few Country Style dogs out there like the Hang Seng (Short EWH) and South Korea’s KOSPI (which was down another -1.6% last week). But it was slim pickings for Equity bears across America and Europe.

Remember, in modern day macro, it’s not about the “valuation” or headline “risks” of things…

It’s not about “making calls” or having fancy “high conviction” opinions either. It’s about getting The ROC (rate of change) of The Cycle right and front-running The Machine.

Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets:

UST 10yr Yield 1.42-1.56% (neutral)
UST 2yr Yield 0.64-0.78% (bullish)
SPX 4 (bullish)
NASDAQ 15,046-16,121 (bullish)
Tech (XLK) 166.13-179.86 (bullish)
Consumer Discretionary (XLY) 193-212 (bullish)
Housing (ITB) 76.44-84.97 (bullish)
REITS (XLRE) 49.45-52.76 (bullish)
DAX 15,246-16,140 (bullish)
VIX 14.67-22.30 (bearish)
USD 95.50-96.65 (bullish)
EUR/USD 1.126-1.138 (bearish)
USD/YEN 113.50-115.58 (bullish)
GBP/USD 1.321-1.361 (neutral)
Oil (WTI) 68.41-79.30 (neutral)
Nat Gas 3.52-4.08 (bearish)
Gold 1 (bullish)

Best of luck out there this year,

KM

Keith R. McCullough
Chief Executive Officer