“This country will be subjected somehow, to a tremendous invasion, by what means I do not know…”
- Winston Churchill
That’s a quote from a book that a member of the #HedgeyeNation Community sent me titled God and Churchill. According to Churchill’s great grandson (author Jonathan Sandys) he said that when he was 16.
When I wake up in the morning, I don’t look for someone’s latest prediction, “call”, or crystal ball. I don’t read narratives. I deliberately measure and map ROC (rate of change) numbers. And I execute.
Are you positioned for a recession? Both this country (America) and many others will be subjected to the ROC realities of #Quad4. By what means The People will see their hard earned net worth invaded, I do not know.
Back to the Global Macro Grind…
I’m back in the saddle in Connecticut this morning after quite a shift with our growing #HedgeyeNation Community in Los Angeles, California. I was in awe of how many people have been on the right side of Global #Quad4 Recession Risk Rising.
Since I do believe in God, I continue to recommend prayer for those who are long of Crypto, Growth Bubbles, etc.
While it’s a lot easier for people to read about someone “making a call” for -20% downside in stocks, it’s a lot harder to A) have been positioned for the -27% we’ve already seen in GROWTH (i.e. The NASDAQ) and B) keep risk managing it the whole way down.
We simplify the complex of our positioning by showing you what our Global #Quad4 Nowcasts are doing. The numbers refresh daily. GROWTH and INFLATION are either #accelerating or #decelerating.
If they keep #decelerating into a #Quad4 Recession, why not QQQ down -23.11% from here?
Here’s this morning’s freshly brewed US GDP Nowcast (by quarter on a year-over-year basis for the next 4 quarters)
- Q3 of 2022 has #decelerated to +1.31% year-over-year (from 5.53% in Q4 of 2021 when we had our Peak #Quad2)
- Q4 of 2022 has #decelerated to +0.70% year-over-year
- Q1 of 2023 has #decelerated to +0.30% year-over-year
- Q2 of 2023 has #decelerated to -0.16% year-over-year
And our Proprietary INFLATION Nowcasts are:
- Q3 of 2022 has #decelerated to +8.33% year-over-year (from the #Quad3 in Q2 of 2022 Inflation Cycle Peak)
- Q4 of 2022 has #decelerated to +7.63% year-over-year
- Q1 of 2023 has #decelerated to +6.67% year-over-year
- Q2 of 2023 has #decelerated to +4.83% year-over-year
Yes, our #process absolutely nailed that CPI number from earlier this week. And, no, the Fed and Tourists don’t use our forecasts.
But no worries, this is going to be a perfectly “soft landing” as markets crash into another 7.58 more rate hikes (with Fed Rate Hike Expectations now at new Cycle Highs = 3.35 more hikes than what was expected after the last rate hike).
That’s right. Jay Powell is as out to lunch on positioning Macro Tourists for a recession as he was for “transitory” inflation.
In LA, a member of the #HedgeyeNation Community asked me (in the live Q&A) what I’d say to some of his friends who “are in high places” who think the risk of a recession is “relatively low.” A: tell them to stop reading narratives and look at my numbers.
‘But, but… KM, we keep getting squeezed AFTER we sell on bright red days.’ Yep, you should. If bear market bounces weren’t led by the prior Bubble’s leaders, it wouldn’t be a bear market! Check out yesterday’s baby-bear-bounce:
A) Post Tuesday’s COVER-SOME carnage, Goldman’s Profitless Tech Basket was +2.1% on the bounce
B) Post Tuesday’s COVER-SOME carnage, Goldman’s “Most Short” Basket was +1.6% on the bounce
And Basic Materials (XLB) were down another -1.2% because those aren’t the stocks Consensus and panic-and-perf-stricken hedgies are short. In fact, plenty of super-late-cycle types are still long those #Quad3 (INFLATION) Stocks, Commodities, etc.
If the head-nodders-in-high-places don’t have the attention span to read my numbers, tell them to look at the Yield Curve:
A) UST 2yr Yield just ramped to new Fed Hike Cycle Highs of 3.82%
B) Yield Curve (10s minus 2s) just collapsed to a -38 basis point inversion
The ONLY other time the UST Yield Curve was this inverted was coming out of the 1 GROWTH Bubble. The Fed was too tight back then too. Greenspan eventually figured it out and turn-tailed dovish, but #Quad4 didn’t go away. Stocks continued to crash.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets:
UST 30yr Yield 3.32-3.58% (bullish)
UST 10yr Yield 3.16-3.48% (bullish)
UST 2yr Yield 3.41-3.83% (bullish)
High Yield (HYG) 73.29-76.12 (bearish)
SPX 3 (bearish)
NASDAQ 11,301-12,090 (bearish)
RUT 1 (bearish)
Tech (XLK) 128-138 (bearish)
Utilities (XLU) 73.47-78.82 (bullish)
Shanghai Comp 3162-3268 (bearish)
VIX 22.36-28.33 (bullish)
USD 108.30-110.66 (bullish)
USD/YEN 139.24-145.63 (bullish)
Oil (WTI) 81.67-90.25 (bearish)
Nat Gas 7.40-9.43 (bullish)
Gold 1 (neutral)
Copper 3.31-3.65 (bearish)
Bitcoin 18,103-21,318 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
