Below is a chart and brief excerpt from today's Early Look written by Hedgeye CEO Keith McCullough.
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Since I try to keep the discipline of only taking up my Asset Allocation to Treasury Bonds when yields are approaching the top-end of my Risk Range™ Signals, I got that buying opportunity late last week: A) UST 2yr Yield was +27 basis points on the week, pricing close to 7 rate hikes (in 2022) at 1.75% When High Yield Spreads breakout like this, it’s also a #Quad4 Signal for a pending ROC (rate of change) #slowing of Corporate Profits. We remain short of both High Yield (HYG) and Junk (JNK) which sold off to new Cycle Lows as well last week. From here, I like Long TLT vs. Short HYG. It’s not that dissimilar from Long Gold vs. Short NASDAQ. While I don’t think they’ll get away with more than 2-3 rate hikes, if the Fed does 6-7, I think I’ll get paid more on these long/short setups during #Quad4. |
