“The America of the 1850s and the America of 2020, despite being very different countries, share a number of striking similarities.”
-Peter Turchin
While Wall Street consensus says that both they and the economy are killing it again, Main Street is getting killed. This isn’t new. Heading into the 2008 recession, while the Old Wall was begging for rate cuts (and got them), Main Street got $147 Oil.
“Between the 1820s and 1860s, the relative wage, the share of economic output paid out as worker wages, declined by nearly 50% - just as it did in the last 5 decades in America. The effect on the well-being of common Americans was devastating.” (pg 17)
The America of the 1850s had the new rich born out of building railroads, steel, etc. The new wealth of 2023 is all about AI, baby! I’m introducing a new AIA @Hedgeye this morning: Actual Inflation #accelerating (for The People who can’t afford it right now).
Back to the Global Macro Grind…
Welcome to the start of September! With the commensurate month-end markup of US Stocks out of the way, it’s back to measuring and mapping both markets and economic data.
Wall Street consensus did its best to call Friday’s jobs report “Goldilocks”, taking what they really WANT/need lower within minutes of the NFP “news” (UST 10yr Yield dropped to 4.05% and USD was down)…
But that begging for the Fed to stop raising rates ended in FX and Bond Market tears with UST 10yr Yield straight up to 4.21% from there and our Core Asset Allocation to the US Dollar ramping to 6-month highs this morning!
So let’s start with what uniquely American stock market FOMO types don’t: The Global Currency Market:
- US Dollar Index was up another +0.2% last week to +1.9% in the last month and remains Bullish TRADE and TREND
- EUR/USD was +0.3% to lower-highs and remains Bearish on both our TRADE and TREND durations
- Japan’s Yen had a Counter @Hedgeye TREND bounce of +0.4% last week that I faded (short Euros and Yens)
- GBP/USD was +0.5% last week but is also back to signaling Bearish on both our TRADE and TREND durations
- Mexican Peso was down -1.9% vs. USD last week, Breaking Bad to Bearish TRADE and TREND
- Russian Ruble continued to crash, down another -1.2% vs. USD last week, crashing -15.8% in the last 3 months
How would you like to live in Russia right now with #Quad3 Stagflation that’s way worse than the USA’s? The worst kind of Stagflation is the kind where your local currency is collapsing and alongside your Cost of Living rising in real terms.
What’s perverse about the Old Wall begging for their Fed to stop raising rates is that it’s driving Inflation’s Re-Acceleration higher:
A) CRB Commodities Index inflated another +2.2% last week to 10.5% in the last 3 months
B) Oil (WTI) inflated +7.7% last week alone to +22.6% in the last 3 months
C) Copper inflated +2.4% last week getting back to a Neutral TREND Signal
So I see their Late Cycle Labor Talking Points (“Fed please stop!”), and I raise YOUR prices at the pump!
Oh, you don’t think Wall Street and/or Fed Policy Expectations had anything to do with the real-world inflation re-accelerating? How else do I get paid Long Oil, Gasoline (UGA), Energy Stocks, etc. with China #slowing into #Quad4 again and Europe in a #recession?
Yeah, they got Bond Yields lower in time for the month-end markup in US Stocks, but those lows for the week on both the Short-End (2yr UST) and Long-end (30yr UST) are gone and my TRADE and TREND signals remain intact:
A) UST 2yr Yield back up to 4.90% this morning with immediate-term upside towards 5.08% ahead of next week’s CPI
B) UST 30yr Yield was actually UP (1 basis point) last week and is up again to 4.33% this morning
So I’ll reiterate staying clear of Long Duration (TLT) and staying with my Core #Quad3 Long/Short Setup with Rates Rising:
A) Long Energy Stocks (XLE) +3.6% last week to +17.0% in the last 3 months with Inflation Re-Accelerating
B) Short Utilities (XLU) which were DOWN -1.6% last week to -2.8% in the last 3 months
Tech (3 stocks = 50% of the ETF, AAPL + MSFT + NVDA) was +4.4% last week. You should be Long Real Growth in #Quad3 (provided the companies are accelerating) as Cyclical Consumption Growth #slows.
Consumer Staples (XLP), which continue to signal Bearish TREND, were DOWN -0.4% last week to -0.6% in the last 3 months.
For those of you who don’t have to navel-gaze at 3-7 US stocks and call that the economy’s perpetual outlook, our Core Asia Asset Allocations continued to deliver last week alongside being Long #Quad3 US Inflation:
A) Japanese Stocks (Nikkei) were up another +3.4% for the home team to +5.0% in the last 3 months
B) Indian Stocks (BSE Sensex) were up another +1.2% for the home team to +6.4% in the last 3 months
We’ll reiterate our Long Japan/India vs. Short China/Europe positions during our Q3 Mid-Quarter Macro Themes Update presentation on Thursday at 11AM ET. Please ping for access to the data-driven event.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 30yr Yield 4.15-4.45% (bullish)
UST 10yr Yield 4.06-4.37% (bullish)
UST 2yr Yield 4.80-5.08% (bullish)
High Yield (HYG) 73.65-75.41 (bearish)
SPX 4 (bearish)
NASDAQ 13,321-14,216 (bullish)
RUT 1 (bearish)
Tech (XLK) 164-178 (bullish)
Energy (XLE) 87.09-91.48 (bullish)
Healthcare (XLV) 132-136 (bullish)
Shanghai Comp 3040-3184 (bearish)
Nikkei 31,725-33,096 (bullish)
BSE Sensex (India) 64,690-65,780 (bullish)
DAX 15,515-16,006 (bearish)
VIX 12.91-17.97 (neutral)
USD 103.10-104.72 (bullish)
EUR/USD 1.074-1.092 (bearish)
USD/YEN 145.16-147.23 (bullish)
GBP/USD 1.252-1.271 (bearish)
Oil (WTI) 80.27-86.70 (bullish)
Gold 1 (bullish)
Copper 3.70-3.90 (neutral)
MSFT 318-332 (bearish)
AAPL 173-191 (bullish)
TSLA 219-265 (bearish)
NVDA 449-503 (bullish)
Bitcoin 24,805-26,993 (bearish)
Best of luck out there this week,
KM
Keith R. McCullough
Chief Executive Officer
