“The way to measure your progress is backward against where you started, not against your ideal.”
- Dan Sullivan
That was one of the more profound things I read while I was with my family for Spring Break. It’s important to make time for your family. Building successful families and firms isn’t easy. Take Sullivan’s advice and build them from the solid foundations that YOU create.
Chasing other people’s ideals and/or perma-portfolio-positions is not my goal. Like The Strategic Coach (Sullivan’s company), my goal is to build upon what I have built. My goal isn’t to lose. It’s to win. I only really lose if I don’t take losses as learning opportunities.
That’s not how most people think. Sullivan explains that in The Gap And The Gain. If you spend most of your time in “the gap” with FOMO and/or anxiety about what you could have been doing today, your intermediate to long-term gains won’t be repeatable.
Back to the Global Macro Grind…
Welcome to another DEEP #Quad4 Macro Monday @Hedgeye where you got paid not to chase GROWTH, SMALL CAP, etc. When I measure and map our progress backwards against where #Quad2 ended (NOV 2021), I am very happy with our results.
We look backward in order to look forward. Let’s start with the Global Currency market:
- US Dollar Index was up another +0.7% last week to +5.8% for 2022 YTD and remains our top Asset Allocation
- EUR/USD was down another -0.2% last week and remains Bearish on both my TRADE and TREND durations
- Yen continued to collapse, down another -1.6% vs. USD and remains in Bearish TREND obviously
- GBP/USD’s was down, hard, -1.7% on the week and continues to break bad in #Quad4
- Canadian Dollar broke @Hedgeye TREND support, closing down -0.8% vs. USD
- South African Rand was down another -6.2% last week after breaking bad to Bearish @Hedgeye TREND
It’s not just South Africa’s currency that abruptly broke bad to Bearish @Hedgeye TREND. Its stock market did too (and is down another -3.7% this morning AFTER we got out of it). Did you get out? That’s on you. Every move YOU make is.
How about Disinflation of the recent Commodity Cycle Peak? How did that look last week?
- CRB Commodities Index disinflated -2.5% last week but remains a Bullish @Hedgeye TREND signal
- Oil (WTI) disinflated -4.1% last week, broke @Hedgeye TRADE support, and is now -21% from its Cycle Peak
- Copper disinflated -2.9% last week, broke @Hedgeye TRADE support, and is breaking TREND support this AM
- Corn inflated another +0.7% last week and remains the strongest TREND in @Hedgeye Signal Strength terms
- Wheat was not Corn, disinflating -2.7% last week, breaking @Hedgeye TRADE support as well
- Rubber disinflated another -2.2% last week and is down another -6.2% this AM = Bearish TRADE and TREND
And, despite explicit #Quad4 signals from Currency, Commodity, and Equity markets, the genius forecasters at the Federal Reserve ramped up RATE HIKE expectation to a new Cycle High of 9.76 HIKES into this 2022 #Quad4 meltdown:
A) UST 2yr yield (which tracks Fed Policy like a glove) was up another +21 basis points last week to 2.67%
B) UST 10yr yield (looks more like longer-term inflation expectations right now) was only +7 basis points on the week to 2.90%
C) High Yield OAS Spread WIDENED another +6 basis points to +355bps over Treasuries (HYG and JNK remain Core Shorts)
And, yes, with Oil disinflating another -4.7% this morning (and Dr. Copper breaking TREND), the long-end of the Treasury Curve sees that with the UST 10yr Yield down -8 basis points to 2.82%.
Looking back, week-over-week, US Equities obviously had a nasty #Quad4 week with:
A) Energy Stocks (XLE) joining the selloff at -4.6% taking 1-month price momentum to barely up at pre-market open
B) Tech (XLK) continued to be a train wreck, down another – 2.4% week-over-week
C) REITS (XLRE) +0.9% and Staples (XLP) +0.5% were UP week-over-week in a sea on consensus GROWTH and SMALL CAP red
Looking backwards to NOV 2021 Cycle Peaks:
A) NASDAQ has crashed -20.1%
B) Russell 2000 has crashed -20.6%
C) Bitcoin has crashed -43.1%
And my man, The MSTR Maestro, Mike Saylor at hope.com told me my #Quad4 “models are going to get destroyed.”
Nice call, Mike. Looking backwards, we use economic, market, and volatility regimes to model and risk manage our Asset Allocations. Bitcoin currently has a new Cycle High correlation of +0.97 to SPY and gets destroyed, most of the time, in #Quad4.
Looking back at the TRENDING Full Investing Cycle Return for Gold, that’s +5.3% in the last 3 months. I’ll stay with that instead.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets:
UST 10yr Yield 2.61-2.97% (bullish)
UST 2yr Yield 2.30-2.76% (bullish)
High Yield (HYG) 79.02-80.85 (bearish)
SPX 4 (bearish)
NASDAQ 12,651-13,638 (bearish)
RUT 1 (bearish)
Tech (XLK) 141-149 (bearish)
Gold Miners (GDX) 36.21-41.80 (bullish)
REITS (XLRE) 48.04-50.71 (bullish)
Shanghai Comp 2 (bearish)
DAX 13,765-14,475 (bearish)
VIX 20.75-30.55 (bullish)
USD 99.69-101.73 (bullish)
EUR/USD 1.072-1.090 (bearish)
USD/YEN 124.59-129.75 (bullish)
GBP/USD 1.275-1.300 (bearish)
CAD/USD 0.784-0.800 (bearish)
Gold 1911-1999 (bullish)
Copper 4.41-4.80 (neutral)
Bitcoin 37,901-42,244 (bearish)
Best of luck out there this week,
KM
Keith R. McCullough
Chief Executive Officer
