You Can’t Change The Numbers

“Most people are other people. Their thoughts are someone else's opinions, their lives a mimicry, their passions a quotation.”
– Oscar Wilde

You may have gotten the hint from my most recent Early Look that I like looking at data.

WRONG. I love data!

Keith was the first one to say it to me: You can’t change the numbers, they are what they are.

Ain’t that the truth.

Just listen carefully over the 4^th of July weekend to your friends and families’ various arguments over politics, inflation, the market, etc. If you want to partake in a fun drinking game, have a sip anytime someone quotes actual data. I’m sure this little exercise will be a sobering reality for many.

The quote of the day exemplifies this to a tee.

Here at Hedgeye we aren’t big on mimicries, fluff think pieces, and feelings. We embrace the radically open-minded principles of transparency and accountability (which I regret to inform everyone, is an increasingly small subsect of the world).

On that note, allow me to give you a data-filled “day in the life.” Noted below are just some of the numbers that I am grinding together with the macro team to help play my part of the Hedgeye machine that is constantly reinforcing our natural intelligence. 

Back to the Global Macro Grind…

The first PDF featured in the daily 7am morning note to the Hedgeye machine, breaks down the price movements across all global markets through ETFs.

I’m first going to take you through the big picture moves from yesterday, then we can look more micro at the data. If you only deal with individual stocks and not ETFs, well then just look at the holdings within the ETFs…

The major up moves yesterday came from the bond market, specifically the municipal bond market: Taxable Muni Bonds ($BAB), High Yield Muni ($HYD), International Corporate ($PICB), National Muni Long Term ($ITM), U.S. 20+ Yr Treasuries ($TLT), and U.S. 7-10 Yr Treasury ($IEF). This is while rate hike expectations through December 2022 came down to 6.98.

The major down moves yesterday came from: Natural Gas ($UNG), Wheat ($WEAT), Grains ($GRU), Cannabis ($YOLO), Corn ($CORN), Small Cap Energy ($PSCE), and Gold Minors ($GDX).

But that is yesterday’s news, the score of the game. Either you were positioned for that or not.

Let’s move to tickers that bounced higher yesterday counter to their trend: Solar ($TAN), Pakistan ($PAK), Kuwait ($KWT), Hong Kong ($EWH), Cancer ($CNCR), and Nigeria ($NGE).

Here are the IVOL Discount callouts for the morning: Colombia $GXG, Thailand $THD, Home builders $XHB, Leisure $PEJ, Private Equity $PSP, 1-3yr Govt Bonds $SHY, 5-10yr Corp Bonds $IGIB, Municipal Bonds ($TFI, $ITM, $HYD)

Here are the IVOL Premium callouts for the morning: Data Sharing $BLOK, Capital Markets $KCE, Sugar $CANE

Let’s dive into the micro data.

Keith has said many times that when the VIX is greater than 30, the ‘F Bucket’, there is no where to hide in equites. Look at the 30D correlations between the ETFs and the S&P 500 (page 2 and 4). Of the 116 tickers, 111 (96%) of them have a significant positive correlation (>0.5). We aren’t even in the ‘F Bucket’ of volatility yet where these correlations get even stronger.

One area that has the largest divergence in these correlations (on a 15D basis) are the Oil Producing Countries in the Middle East. But, let’s look a little deeper. After the invasion by Russia on 2/24, Qatar $QAT, Saudi Arabia $KSA, Kuwait $KWT, and United Arab Emirates $UAE all saw significant increases in equities to cycle highs: +14%, +11%, +11%, and +14%. From their cycle highs in mid-late April they are not doing as well: -19%, -19%, -12%, and -19%.

In case #Quad4 wasn’t already apparent, let’s look at every ETF and find the only tickers that are up on a 3M basis (7 of 163 or 4%): Gasoline ($UGA), Brent Oil ($BNO), U.S. Oil ($USO), U.S. Dollar ($UUP), China Large Cap ($FXI), Carbon Offsets ($KRBN), and Soybeans ($SOYB). I recommend reading the Early look on Monday 6/27 for Keith’s perspective on commodities. 5 of the 7 tickers above are commodities, and the other two are known longs of ours.

Finally, take a quick look at the last page: Commodities. The one-month price performance for 30 of 32 commodities are red with the only green numbers coming from Dutch Natural Gas +61% and Live Cattle +1.69%. On a one-month basis, we have seen three commodities crash: Ferrous Scrap, Oats, and Natural Gas.

There are more themes in here, but I don’t want to ruin the fun for you to discover them. Let us know on Twitter what you find @hedgeye, #teachme! As well, this pdf is updated every day so once the market closes today, we get new numbers and new opinions. Think of it as the motion of the tides!

Let’s transition to the high frequency world macro data that came out while you were sleeping.

• South Korea $EWY Manufacturing PMI (June) slowed to 51.3 from 51.8
• South Korea Exports (June) slowed to +5.4% YoY from +21.3% YoY
• Worst since Nov. 2020
• Indonesia $IDX Inflation (June) increased to +4.4% YoY from +3.6% YoY
• Indonesia Manufacturing PMI (June) slowed to 50.2 from 50.8
• Japan $EWJ Manufacturing PMI (June) slowed to 52.7 from 53.3
• China $KWEB Caixin Manufacturing PMI (June) rose to 51.7 from 48.1
• Highest since May 2021
• India $INDA Manufacturing PMI (June) slowed to 53.9 from 54.6
• Germany $EWG Manufacturing PMI (June) slowed to 52 from 54.8
• Lowest since July 2020
• France $EWQ Manufacturing PMI (June) slowed to 51.4 from 54.6
• GB $EWU Manufacturing PMI (June) slowed to 52.8 from 54.6
• 2 year low
• Eurozone Inflation (June) rose to +8.6% YoY from +8.1% YoY
• ATH for the 9^th month in a row
• Italy $EWI Inflation (June) rose to +8.0% YoY from +6.8% YoY
• Highest since Jan 1986
• Turkey $TUR Manufacturing PMI (June) slowed to 48.1 from 49.2
• South Africa $EZA Manufacturing PMI (June) slowed to 52.2 from 54.8
• Poland’s $EPOL 2-10 spread drops 12 bps DoD
• The Current 2-10 Spread is at 8 bps while the 1 year forward 2-10 spread is at 7 bps
• The forward 2-10 spread has been inverted since Feb 2022 and peaked in March 2021
• VIX Closed at 29.29 (Chop Bucket), Russell Vol closed at 33.96 (F Bucket), and Nasdaq Vol closed at 36.21 (F Bucket)

I’ll stop there (even though I would like nothing more than to keep talking data).

Remember, next time you hear Macro Tourist talk before you start lighting the fireworks to simply ask them: “What’s the data?”

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

UST 10yr Yield 2.96-3.37% (bullish)
UST 2yr Yield 2.90-3.25% (bullish)
High Yield (HYG) 72.71-75.10 (bearish)            
SPX 3 (bearish)
NASDAQ 10,514-11,482 (bearish)
RUT 1 (bearish)
Tech (XLK) 121-132 (bearish)                                                
Shanghai Comp 3 (bullish)
Nikkei 25,527-26,986 (bearish)
DAX 12,680-13,407 (bearish)
VIX 26.30-33.75 (bullish)
USD 103.22-105.40 (bullish)
EUR/USD 1.039-1.060 (bearish)
Oil (WTI) 103.03-112.55 (neutral)
Nat Gas 5.31-6.94 (bearish)
Gold 1 (bullish)

Have a wonderful long weekend,

Ryan Ricci
Macro analyst