October 2023 marked the third full-cycle U.S. stock market crash in the past 25 years.
Only one investment process can accurately lay claim to anticipating all three downfalls, not to mention an equally devastating collapse in US Treasury bonds.
Led by CEO Keith McCullough’s signals, in January 2022, Hedgeye predicted widespread economic decline. The results speak for themselves:
- The Russell 2000 has crashed -33% from its 2021 peak.
- The UST 10-year Yield skyrocketed from 1.5% to 5%.
- Long-term Treasuries (TLT) have crashed -44% from the 2021 peak. (You’d need to be up +78% to break even.)
- Even the QQQ is in Crash Mode, down -20.2% from its peak. (You’d need to be up +25% to get your money back.)
At Hedgeye, we pride ourselves on a #BetterWay. We don’t subscribe to a generation’s dogma about what being “fully invested” and chasing short-term “charts” means. We aren’t what "they" want/need us to be.
Times like these are exactly why McCullough chose to leave Old Wall behind and establish a firm of his own 15 years ago.
“My mom asked me a question. We were standing outside the beautiful house we were able to build in Thunder Bay, Ontario, with my hedge fund ‘winnings,’ and she said, ‘I still don’t understand what you do.’”
McCullough explained his job as a hedge fund manager, and his mom replied, “How are you going to change the world doing that?”
The question was an eye-opener that put a profitable career into perspective.
“Hedgeye was born within a year after that,” McCullough says.
Rather than generate capital for he and his family, why not share that #process with the masses? Founded on the principles of transparency, accountability and trust, the mission of Hedgeye is to provide average Americans access to world-class investment research.
As the son of a teacher and firefighter, McCullough has a passion for helping grinders. Never is that more evident than when the firm’s 40+ analysts help spare subscribers from the bloodshed mentioned above.
“In 25 years, my mom hasn’t asked me about the market until this year. Why? She's a retired teacher with a pension. Those go straight down. Teachers aren’t allocated into 5% risk-free investments yet. The amount of pain that’s out there is so tangible and so loud that it’s deafening in terms of how Wall Street has ignored it. It’s amazing to watch."
While Establishment Media encouraged people to pile into a handful of mega-cap tech stocks, we've been sounding the alarm of the market's risks for months on end. Returns of the S&P 500 have remained artificially inflated by a select group of seven stocks McCullough dubbed "The Magnificently Manipulated 7" for their ability to defy conventional financial metrics and maintain high valuations.
Tier 1 Alpha, which shares its options-trading and flow research exclusively to Hedgeye subscribers, put this distortion in perspective:
“As of October 25, those stocks represented around 20% of the index, which is the highest reading since the bear market low back in October of 2022. Meanwhile, year-to-date highs are essentially non-existent, as the current weakness has been widespread throughout the index. Again, all things point to a 'hidden bear market,' while the mega-caps continue to distort reality."
The crazy part: Investors are chasing extreme market highs a time when the risk is unnecessary. While stocks and bonds crashed in unison, McCullough continued to issue signals to Hedgeye subscribers to help them successfully navigate the carnage.
Perhaps the biggest differentiator between Hedgeye and other financial research platforms is our CEO's willingness to pull back the curtain on his #timestamped positions. In Hedgeye's new Long Only Portfolio Solutions product, subscribers can see every move McCullough makes in his allocations, including ETFs added, removed and re-ranked.
In an effort to maintain a fully macro-aware investing perspective, Hedgeye preaches the importance of a #GoAnywhere approach. No asset class or international equity is off limits. McCullough is the first to admit that approach takes a team. With analysts researching every sector from Retail and Restaurants to Tech and Telecommunications, subscribers receive a comprehensive read on the economy to complement McCullough's signals.
Another conservative strategy (without an over-exposure to inflated tech equities): Good, old-fashioned savings accounts. As Retail analyst and Hedgeye co-founder Brian McGough recently shared (as high-yield savings account hit 5%+):
“People have less in the bank than they did pre-pandemic, at a point where the bank is finally paying you to have money in the bank,” McGough explains. “But instead, people are spending it. Why? Because we’re Americans, and we spend.”
This reflects another troubling trend we’re seeing, not just among individual investors, but the U.S. government as a whole: taking on debt to kick their financial problems further down the road (with added interest tacked on).
- 54% of Americans use savings to pay for everyday expenses like groceries and rent
- Consumer credit card debt surpassed $1 trillion for the first time this year
- The US debt now stands at over $33 trillion
The U.S. government will spend whatever it takes to delay an economic recession, at great costs in the months and years to come. On a year-over-year basis, government spending accelerated from 0.9% to 2.7% (in Q1) then from 2.7% to 3.8% in Q2.
“If you sign off on Big G (government spending), then you know going into the presidential election you’re going to slow against those Big G base effects,” McCullough explains. “You don’t just get that for free. For all of 2023, you can say, ‘Look, there’s no recession, the job market’s great,’ because you bought the numbers.”
The bill will come due on all of this, and when it does, the signs of a slowdown that became apparent in late October will just be the beginning.
There’s a #BetterWay with Hedgeye. Join us and protect your hard-earned capital.
