“The new people and the quick riches
Have begot pride and excess in you,
Florence, and already you weep for it…”
- Dante, Inferno
Churchill said that if you’re going through hell, “keep going.” And if you want to get Bearish Enough on markets that are already in the midst of #Quad4 Crashes, we’ll help you with that at 11AM ET on our Q3 Macro Themes Call! If you’d like access to the presentation and/or slide deck, ping .
Back to the Global Macro Grind…
The aforementioned quote from Dante’s Inferno was used by Michael Knox Beran in a chapter of WASPS that he appropriately titled “Henry Adams Fails To Reform America.”
In many ways that was a different America than the one some of us are living in today. In other ways, particularly on the #behavioral side of “quick riches” and “excess”, it’s very much the same.
By the time I get to slide 50 in the US section of our Global Macro Themes deck today, I’ll show you how the “high end” of America is about to see their “wealth effect” slam into reverse.
On the “low-end” (we’re not talking about quality of human beings here – we’re talking about INCOMES by American quintiles), The People are already getting slammed into a Real Consumption Recession.
Did I write #Recession?
Yep. Everyone with a pulse knows about INFLATION at this point. What everyone on the Old Wall and at the Fed doesn’t know about is RECESSION > Inflation = #Quad4.
But you know who knows about it, right? The People do.
Did you see yesterday’s #Quad4 Crash in US Consumer Confidence? That print #crashed to a new Cycle Low of 98.7 in JUN vs. an initial print of 106.4 in MAY.
And…
“Recession” just surpassed “inflation” in Google search TREND interest. The People can “feel” the #Quad4 economic Phase Transition that markets have been pricing in since we went all #Quad4 on you in January.
You know SPY has crashed -20.3% since JAN 3rd, eh?
Yep, even if The People don’t “understand” the sophisticates on ye Olde Wall that thought INFLATION was “transitory” at this time last year, prospective inflections in break-evens, etc., they get how much money they have left post their REAL spending.
This analytical break-down takes > 151 slides in our Macro Deck. So I’ll stop here on that and give you the market’s read on it:
- NASDAQ resumed its #Quad4 Crash yesterday, crashing to -30.4% from its #Quad2 Cycle Peak
- Russell 2000 resumed its #Quad4 Crash yesterday, crashing to -28.8% from its #Quad2 Cycle Peak
- Our Top 2 Sector Shorts for #Quad4 (Tech and Consumer Discretionary) = -3% and -4%, respectively yesterday
- Bitcoin’s #Quad4 Crash is now at -71% from where it peaked (in #Quad2 when the Russell did in NOV 2021)
- Copper is resuming its #Quad4 Crash this morning, crashing -24% from its Inflation Cycle Peak in March
- Corporate Spreads (BBB Bonds vs. 10yr) WIDENED to a new #Quad4 Cycle High of +207bps over yesterday
The Yield Curve remains inverted on a 1-year Forward OIS basis (10yr minus 2yr) as the front-end of that has collapsed to +6 basis points on 10s minus 2s this morning.
"But, but, the Fed … and inflation… and…"
Yep. We get it. We were the 1st Independent Research (and only Full Cycle Investing) firm to tell you that we were entering a Bullish Commodity Cycle with #InflationAccelerating in JUNE of 2020, don’t forget.
Now, TWO YEARS later, I am going to tell you to Short Commodities, as an Asset Class, on our 11AM Call today.
That’s the thing that really sucks about the REAL #Slowing you see during a #Quad4 Recession – even the people who got really rich selling things at inflated prices start to “feel” less rich, really fast.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets:
UST 10yr Yield 3.05-3.47% (bullish)
UST 2yr Yield 2.92-3.40% (bullish)
High Yield (HYG) 72.37-75.54 (bearish)
SPX 3 (bearish)
NASDAQ 10,456-11,530 (bearish)
RUT 1 (bearish)
Tech (XLK) 120-134 (bearish)
VIX 26.83-33.93 (bullish)
USD 103.10-105.56 (bullish)
Oil (WTI) 102.05-116.10 (bullish)
Nat Gas 5.88-7.55 (bearish)
Gold 1 (bullish)
Copper 3.52-4.01 (bearish)
TSLA 629-762 (bearish)
Bitcoin 18,981-22,753 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
