"Never forget the lives lost on 9/11 and the countless acts of bravery that emerged from the darkness of that day. Their memory lives on in our hearts."
- Unknown
While that quote is from an “unknown”, we all know. We’ll always remember 9/11. My thoughts and prayers will always be with the families who were impacted by these terrible acts of darkness.
#NeverForget.
Back to the Global Macro Grind…
Welcome to another Macro Monday @Hedgeye. This one is LIVE from Las Vegas where we’ll be hosting our Hedgeye Regional conference. If you’re rolling the bones out here and want to attend, I’m sure we can make that happen.
Just ping . Our group dinners in particular are a lot of fun for me personally. I enjoy getting to know you all.
Let’s get down to business with our weekly review of Global Macro Markets through the lens of our multi-duration and multi-factor signaling process. Never forget that the process is SIGNAL to QUAD… then Quad to Pod!
The Global Currency Market continues to signal #Quad3 Stagflation for many countries whose currencies are collapsing vs. USD:
- USD Index continued to get us paid on the Long Side, up another +0.8% on the week and remains Bullish TRADE and TREND
- EUR/USD continued to get us paid on the Short Side, down another -0.7% last week and remains Bearish TRADE and TREND
- Yen was down another -1.1% last week to -3.1% in the last month and remains another Top Short vs. Long USD
- GBP/USD continued to break-down (good signal there) -1.1% last week and remains a relatively new Bearish TREND
- Colombia’s Peso was down hard, -5.0% vs. USD taking its 3-month Currency Crash to -12.2%
- Polish Zloty was down hard too, -3.9% vs. USD taking its 1-month breakdown to -5.3% = Bearish TREND and TREND
While it’s generally disrespected and/or outright ignored by the Old Wall and its conflict of interest media, #Quad3 Stagflation is a real-life thing for The People who are experiencing it. Their Cost of Living is rising, in real-terms, as their economies are slowing.
We reviewed the dynamics of the Macro Market SIGNAL front-running TRENDING Quads during our 188 Slide Mid-Quarter Macro Themes deck last week. While the USA should report 1 more non-recessionary quarter (Q323), the Macro Market is front-running #Quad3.
On the “FLATION” front of #Quad3 Stagflation, being Long of Oil, Energy, etc. continues to generate alpha:
- Oil (WTI) inflated another +2.3% last week to +6.3% and +23.3% for the last 1 and 3 months, respectively
- Energy Stocks (XLE) were up another +1.4% last week to +5.3% and +12.6% for the last 1 and 3 months, respectively
- Rubber inflated +7.8% last week to +13.3% in the last month alone
Rubber? Yep, you know what that is. You know what happens to the price of “things” when Oil keeps inflating too.
With Oil Volatility (OVX) collapsing to new #Quad3 Reflation Cycle Lows at 27.16 on front-month, the TOP-end of my WTI Risk Range continues to imply HIGHER-HIGHS (those are Bullish when The Signals are Bullish TRADE and TREND) up at $90.17/barrel.
While some parts of the uniquely American stock market don’t quite get this yet, both the FX and Global Bond Markets obviously get it. Even our friends in Japan say they’ll consider the crashing Yen’s impact on the Japanese economy after 2023 ends!
A. UST 2yr Yield ramped another +8 basis points (bps) higher last week to +22bps in the last month alone
B. UST 10yr Yield ramped another +8 basis points last week as well to +24bps in the last month alone
So is #Quad3 Stagflation already “priced in” to this week’s ROC (rate of change) #accelerating CPI report? Some of it is. Especially if you faded that Rates and USD move on the day of the US Jobs Report (when UST 10yr touched 4.05%!), you got paid understanding it.
All the while our Bond Yield and Cycle Sensitive #Quad3 US Equity SECTOR Shorts continued to work last week:
A. Industrials (XLI) led losers with a -2.9% decline last week to -3.2% in the last month
B. Real Estate REIT (XLRE) worked on the Short Side again last week with a -1.1% drop to -2.3% in the last month
Our long-standing Core “Broad Basket” of US Stocks Short was even better last week with the Russell 2000 (IWM) down hard (-3.6% week-over-week). SMALL CAP Factor Exposure hates #Quad3.
Internationally, it was another good week for our Long/Short Country Exposures as well with European Equities down (France, EWQ, down -0.8% on the week) vs. India (INDA) breaking out to new Cycle Highs on the Long Side (+2.2% week-over-week).
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 30yr Yield 4.18-4.45% (bullish)
UST 10yr Yield 4.09-4.36% (bullish)
UST 2yr Yield 4.83-5.03% (bullish)
High Yield (HYG) 74.01-75.05 (bearish)
SPX 4 (bearish)
NASDAQ 13,551-14,101 (bearish)
RUT 1 (bearish)
Tech (XLK) 168-177 (neutral)
Energy (XLE) 88.53-92.97 (bullish)
Healthcare (XLV) 130-135 (neutral)
Shanghai Comp 3085-3197 (bearish)
Nikkei 32,011-33,408 (bullish)
BSE Sensex (India) 64,692-67,251 (bullish)
DAX 15,601-15,947 (bearish)
VIX 13.01-16.98 (neutral) $NATGAS
USD 103.43-105.77 (bullish)
EUR/USD 1.062-1.085 (bearish)
USD/YEN 145.22-148.41 (bullish)
GBP/USD 1.240-1.269 (bearish)
Oil (WTI) 82.20-90.17 (bullish)
Oil (Brent) 85.86-92.99 (bullish)
Gold 1 (bullish)
Silver 23.08-25.11 (bullish)
AAPL 173-187 (bearish)
Bitcoin 25,012-26,403 (bearish)
Best of luck out there this week,
KM
Keith R. McCullough
Chief Executive Officer
