“The old American republic is collapsing. And a new American republic, as yet unrecognizable, is under construction.”
-Neil Howe
And you thought I was bearish! I’ve had the pleasure and privilege of working with the world’s best Demographer, Neil Howe, for almost 8 years now. I couldn’t be more proud of my Hedgeye Partner and his recent book: The Fourth Turning Is Here.
In Chapter 1, “Winter Is Here”, Neil starts by reminding us that “in the mid-2000s, most voters still read the same news and trusted their government… then came the GFC, the rise of populism, and the pandemic…”
“79% of voters agree that America is falling apart. 76% worry about losing American democracy. 62% say the country is in a crisis.” I guess that’s why my US GDP Nowcast has no economic recovery in it as far as my Quads can see!
Back to the Global Macro Grind…
Welcome to another Macro Monday @Hedgeye where I don’t do politics, polls, or feelings. I do The ROC (rate of change). And it’s just another morning where the establishment Old Wall media is “surprised” by further economic #slowing!
While last week’s US economic data #slowing further into both The Fourth Turning and #Quad4 was largely ignored by mainstream media (the #2 and #4 ranked features in our 30-feature US GDP Nowcast, Industrial Production and Retail Sales, #slowed to new CYCLE LOWS with Industrial Production in an official year-over-year RECESSION at -0.43%)…
There’s nothing I can do about that other than get my Gen-X butt up at 4:35AM ET and grind. Evidently you (and many others) are willing to pay a premium for apolitical and data-driven research. My teammates and I sincerely appreciate that.
There’s nothing else I can do about demography’s impact on time and space. So let’s get on with the #process and measure and map what the Global Currency market was signaling last week:
- US Dollar Index was +1.2% last week, recapturing its Bullish @Hedgeye TREND level vs. the Euro in particular
- EUR/USD was down -1.2% last week, breaking @Hedgeye TRADE and TREND support levels (again)
- Japanese Yen was down another -2.3% vs. USD and remains our biggest FX Short vs. USD
- GBP/USD was down -2.1% last week, breaking bad to Bearish TRADE (but is still holding Bullish TREND)
- Argentine Peso was down another -1.6% vs. USD, taking its #Quad4 currency crash to -18.9% in the last 3 months
- Turkish Lira was down another -2.9% vs. USD, taking its #Quad4 currency crash to -28.0% in the last 3 months
What does a polarized and uniquely American AI Bull really care about the plight of The People in Argentina or Turkey? Some of them wouldn’t know what’s going on in the rest of the world (economically) if I forced them to tell me what The ROC means!
Then there’s the disaster that’s become Bloomberg “news.” On this day last week, their #1 editorial headline read “Dollar’s Busted Bull Run Is End Of An Era.” LOL
While it’s crystal clear “why” they and/or CNBC won’t be running “INFLATION Re-ACCELERATING” headlines this morning, that doesn’t mean that didn’t happen (again) last week:
- CRB COMMODITIES Index reflated another +2.1%, breaking out on both my TRADE and TREND durations
- Oil’s (WTI) INFLATION re-accelerated another +2.3% last week and is also signaling Bullish TRADE and TREND
- Corn reflated +4.4% last week and Wheat reflated +5.4%
- Natural Gas reflated +7.0% last week to +21.2% in the last 3 months right on time for August Air Conditioning
- Orange Juice INFLATION was +10.1% last week alone to +16.4% in the last month
- Egg prices are up another +5.9% this morning to +21.1% in the last month
OJ and Eggs? Are you kidding me? Who consumes those things anymore when Wall Street is on all of these cool diets? In real-world news, the 50% of American Households with incomes < $70k (the median) have to eat what they can afford.
‘But KM, their stocks were up.’
Cool. Ours were too. We’re long HEALTHCARE INFLATION while acknowledging that The People still have to pay for it:
A) Healthcare Stocks (XLV) were up +3.5% last week and we remain Long of both PINK and XHE
B) Energy Stocks (XLE) were up +3.5% as well last week after breaking out to Bullish TRADE and TREND
C) Consumer Discretionary (XLY) was DOWN -2.3% last week, breaking @Hedgeye TRADE support
‘But KM, that XLY drop was only because TSLA was down.’
Cool. So there was no fundamental reason for TSLA to be straight up ahead of reporting reality. It was up because of A) The Flows of The Machine and B) #MOAB (Mother of All Bubbles) Behavior (performance chasing) on Wall Street.
Yep. Onto the next. We have about $27 TRILLION in market cap reporting this week.
We also have both China and The Bond Market signaling that Inflation’s Re-Acceleration is bearish:
A) Chinese Stocks dropped another -2.2% in Shanghai last week and we remain Short of FXI and EWH
B) UST Yield Curve RE-INVERTED another -7 basis points to -100bps on the 10yr minus the 2yr yield
What else? Does it really matter at this point? I’m betting that at least 80% of what I wrote isn’t considered Wall Street media consensus at this point. Notwithstanding that it is all empirical fact, that’s the point. The Fourth Turning is here.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 10yr Yield 3.69-4.04% (bullish)
UST 2yr Yield 4.59-5.00% (bullish)
High Yield (HYG) 73.71-75.80 (bearish)
SPX 4 (bearish)
NASDAQ 13,765-14,445 (bullish)
RUT 1 (bearish)
Tech (XLK) 171-182 (bullish)
Financials (XLF) 33.32-35.54 (bearish)
Defense (ITA) 115-119 (bullish)
Healthcare (PINK) 25.95-27.44 (bullish)
Shanghai Comp 3146-3231 (bearish)
Nikkei 31,885-33,107 (bullish)
BSE Sensex (India) 64,928-67,820 (bullish)
DAX 15,718-16,272 (neutral)
VIX 12.93-16.34 (neutral)
USD 99.56-102.18 (neutral)
EUR/USD 1.101-1.123 (bearish)
USD/YEN 137.95-142.38 (bullish)
GBP/USD 1.276-1.311 (bullish)
Oil (WTI) 73.35-77.68 (bullish)
Oil (Brent) 77.77-81.64 (bullish)
Nat Gas 2.45-2.83 (bullish)
Gold 1 (bullish)
Copper 3.71-3.95 (bearish)
Silver 23.28-26.12 (bullish)
Bitcoin 29,306-30,775 (bearish)
Best of luck out there this week,
KM
Keith R. McCullough
Chief Executive Officer
