“The disease of our times is that we live on the surface. We’re a mile wide and an inch deep.”
-Steven Pressfield
That’s a good quote from a good writer (Pressfield wrote The Legend of Bagger Vance, Gates of Fire, etc.). I recently found it in a brick of a book by Tim Ferriss titled Tribe of Mentors – Short Life Advice From The Best In The World.
If I could only give you one piece of advice about Macro it would be: don’t be a Macro Tourist. It’ll eventually kill your returns and/or get you fired. Jumping from headline to headline and/or inch-deep-click-bait is no way to live a Full Investing Cycle life.
One of the most touristy memes in The Game today is the “pivot” (from Peak Cycle Inflation). If you don’t know that both inflation and MARGINS have peaked, now you know. Do you know what a Global #Quad4 Profit Recession is going to look like?
Back to the Global Macro Grind…
I’m not bad at inch-deep-Macro-one-liners… but that’s only because my apolitical and data-driven Research Team goes deeper than anyone in The Game in measuring and mapping The Global Macro Cycle across countries and durations.
If you’d like to listen to the replay of our in depth (163 slide) Mid Quarter Macro Themes Update from yesterday, ping Jamie Bruno or Danny New: .
If you’d like to contextualize both our intermediate-term CYCLICAL TREND research with the longest of LONG-TERM Demographic Research, my man Neil Howe will be doing a Real Conversation with Danielle Di Martino Booth on the Fourth Turning at 1PM.
So what happened in the Bond Market yesterday? It was one of the Biggest Signal Strength days of The Cycle:
- SHORT END (i.e. Fed Policy) signaled NO PIVOT
- LONG END (UST 10s and 30s) signaled GROWTH SLOWING FASTER THAN INFLATION
- YIELD CURVE signaled #Quad4 Recession happening FASTER now
Ok. Sounds pretty straightforward, eh? Instead of numbing your morning with narratives, here are some numbers:
- SHORT END = UST 2yr Yield is UP this morning to 4.37% and is UP +4 basis points week-over-week
- LONG END = UST 10yr Yield was DOWN hard yesterday breaking @Hedgeye TRADE support of 3.81%
- YIELD CURVE = 10s minus 2s got to a bone-chilling -66 basis points = a new Cycle Low = #Quad4
Got it. How about we dig a little deeper into that SIGNAL to economic QUAD relationship:
- UST 2yr Yield would have to break-down through TREND Signal Support of 3.89% to signal a Fed Pivot
- UST 10yr Yield breaking bad through 3.57% TREND Signal Support would get us LONG Duration again
- Typically the curve STEEPENS in a Recession because the Fed is pivoting (i.e. CUTTING short-term rates)
But this Fed isn’t your typical Greenspan, Bernanke, Yellen Fed. This Fed (which Danielle and Neil will explain at 1PM) is the real deal, channeling Powell’s inner-Volcker.
Is that why the Yield Curve is as inverted as it was heading into the 1981 US Recession?
A: Yes. I think this could very well be a Regime Shift in Rate Policy.
What is a Regime Shift in Rate Policy?
A: No rate cuts.
Can you imagine an America where a Republican head of the Fed locks arms with a Republican Presidential Candidate (DeSantis) and says no more Easy Money Policy in America. “We want a Strong Dollar, Sound Money, and a Strong America.”
*Full Disclosure: DeSantis and I drank (many) beers with all the knucklehead hockey and baseball players back in the late 90’s (he was the Yale Baseball Captain) and I’m advising him on how to beat Pump.
#Kidding on the second part of that.
But if I was advising anyone who is running against the guy who is still sleeping or Trump, I would highly recommend painting both Biden and Pump as Easy Money Printers who perpetuated all of the bubbles and fraud we are dealing with today.
Can you imagine? You better be able to imagine something that’s beyond an inch of your keyboard this morning. If this is 1981 (see Chart of The Day, slide 52), the 2022 Powell US Dollar breakout chart is just getting started.
Oh, but the Dollar went down for a few weeks. I feel so bad for you…
I almost feel as bad as I do for those lying and scamming scumbag liars who just blew up a generation’s (Millennials) hard-earned capital in Luna and Shibu Dog$hit coins.
If there is no rate cut next year, no generation will have seen a Yield Curve or Recession like this one before.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 30yr Yield 3.80-4.48% (bullish)
UST 10yr Yield 3.62-4.37% (bullish)
UST 2yr Yield 4.25-4.86% (bullish)
High Yield (HYG) 71.50-74.86 (bearish)
SPX 3 (bearish)
NASDAQ 9,999-11,503 (bearish)
RUT 1 (bearish)
Tech (XLK) 116-134 (bearish)
Consumer Staples (XLP) 70.50-74.52 (bullish)
VIX 22.30-27.72 (bullish)
USD 105.03-111.96 (bullish)
EUR/USD 0.971-1.043 (bearish)
Oil (WTI) 83.02-93.01 (bearish)
Gold 1 (bullish)
Bitcoin 14,490-18,869 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
