Great news to announce.
Our 2nd Annual Hedgeye Live Conference returns to the Hyatt Regency in Greenwich, CT May 4–7. Our team cannot wait to see you there.
Hedgeye Live is an ultra-exclusive 3-day learning experience comprised of live video broadcasts, Sector Breakout sessions, Macrocosm, hosted dinners, tours of Hedgeye’s HQ & TV studios, plenty of networking, exquisite hospitality and the obligatory Hedgeye Bash (this year’s theme: Dreamworld.)
Our inaugural conference last May surpassed our team's lofty expectations as well as attendees who attended from across the US and all over the world. We invite you to join us – whether you're returning or will be here for the first time. Tickets and the full schedule are available at www.hedgeyelive.com.
The program this year features a live Real Conversation between Keith McCullough & Hugh Hendry, the Founder of Eclectica Macro, St. Barts luxury hotelier and investor. Other guests include KraneShares Chief Investment Officer Brendan Ahern, Fed insider Danielle DiMartino Booth, investing legends Mike Taylor and Michael Green, and many more guest surprises to come.
Attendees will have many opportunities to hear from and interact with Hedgeye Sector Heads and other members of our extended research team about their process, research and current Best Idea longs and shorts.
Our biggest takeaway from those who attended last year: #HedgeyeNation is a group of likeminded people keenly interested in getting to know one another, learn and have fun together. Rest assured, we will make more opportunities for networking and knowledge sharing available. Hedgeye Live 2023 promises to be the highlight of our conference series.
Secure your tickets now, before they sell out!
Back to the Global Macro Grind . . .
By the time you get this note, we will have received January’s much awaited CPI report. The question: is what narrative will ultimately prevail after the report?
On the hawkish side, a CPI report that remains high and/or accelerates at all on a M/M basis will be fodder for those that believe rates are going higher and will remain high for longer than expected. In this camp, you can include bond investors and the talking heads of the Federal Reserve.
On the first point on bond investors, yields have ramped up dramatically since the start of February. Specifically, the 2-year Treasury Yield is now at 4.50% compared to 4.04% on February 2. Additionally, Fed Funds Futures (included in the Chart of the Day below) have priced in +0.55 more hikes since the last FOMC rate announcement in January.
In other words, bonds are quite clear on what they think.
In terms of the Fed, last week Jay Powell indicated “that we likely need to do additional rate increases.” He went on to say that the jobs report shows the “fight against inflation will take some time.” While other members of the Fed echoed the idea of smaller steps going forward, they have been pretty adamant that rates will continue to go higher.
Conversely, of course, the equity market has been telling us a different story. In general, the riskiest stocks have rallied the most this year. By this I mean, the stocks with the highest short interest, highest multiples, and most significant underperformers from 2022. Meanwhile, the VIX (gauge of fear) is at 20.52 and down some 10+% YTD.
The equity market seems to think (or hope) that we will soon be back to easy money days.
Regardless of which you believe, bonds or equities, we will soon be on to fretting about and analyzing the next economic data points. As luck would have it, tomorrow we get January U.S. Retail Sales. Consensus has a +1.6% M/M increase, which is an acceleration over the -1.1% M/M decline in December. There is probably upside to this number as Auto Sales are tracking at +18% M/M and compromise some 20% of the Headline number.
Don’t forget though . . . good news on economic data is actually bad news. A blow out Retail Sales report is akin to a blow out labor report. It means the U.S. economy is probably not cooling quick enough to meaningfully and sustainably slow inflation.
On the topic of inflation, my fellow veteran colleague Howard Penney joined me during The Macro Show yesterday morning and delivered a clear-eyed update on the fundamental dynamics in the restaurant sector. He noted that restaurants had a strong January with comp sales up some +16% Y/Y. According to key data his team reviews, roughly +5.9% of that increase was due to increased customer counts. The implication then is that the remaining 10% was due to price increases!
If restaurants are still increasing prices by 10% Y/Y, I think we can all agree that whatever happens this morning with CPI . . . the inflation conundrum is probably not yet solved!
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 30yr Yield 3.48-3.88% (neutral)
UST 10yr Yield 3.34-3.83% (neutral)
UST 2yr Yield 4.22-4.70% (bullish)
High Yield (HYG) 74.32-77.03 (bearish)
SPX 3 (bearish)
NASDAQ 11,233-12,223 (bearish)
RUT 1 (bearish)
Tech (XLK) 133-145 (bearish)
Defense (ITA) 113-117 (bullish)
Gold Miners (GDX) 28.60-32.73 (bullish)
Shanghai Comp 3 (bullish)
Nikkei 27,166-27,826 (bearish)
VIX 18.03-21.67 (bullish)
USD 101.12-104.53 (bullish)
Oil (WTI) 72.60-80.99 (bearish)
Nat Gas 2.30-2.71 (bearish)
Gold 1 (bullish)
Copper 3.98-4.20 (bullish)
Silver 21.25-23.93 (bullish)
Bitcoin 20,128-23,334 (bearish)
Keep your head up and stick on the ice,
Daryl G. Jones
Director of Research
