“The fox knows many things, but the hedgehog knows one big thing.”
-Isaiah Berlin
While Old Wall Street and its Macro Tourist media jumps from headline to headline and seemingly “knows” many things, Hedgeye knows one big thing. It’s called The Cycle. And now it’s cycling into a proper US Recession.
We’ll, of course, get asked thousands of questions about how and why we’re entering a recession. We appreciate that. Depending on their level curiosity, we have 181 slides in the current Q4 Macro Themes deck for foxes to review!
Contact to access the full 181 slide Q4 Macro Themes deck.
Taking a longer-term, multi-factor, multi-duration, view gives us our differentiated vision. While we recognize there are other “views”, we’re going to patiently stay with ours across the Full Investing Cycle.
Back to the Global Macro Grind…
My Partner and Chief Long-term Cycle Demographer, Neil Howe, has a different research #process than I do, but he’s reached the same hedgehog conclusion. The recession is here:
“It’s only fair that those who see the world like a fox will want to dig deeper to understand how it all actually works.”
-The Fourth Turning Is Here, pg 148
So, how does a recession work?
A) The ROC (rate of change) that is already slowing starts to slow at a faster pace
B) Risk happens slowly, then all at once
Want to dig deeper? Ok, let’s think about how you personally might experience a recession:
A) The ROC of your company’s revenues (that are already slowing) slow at a faster pace
B) Then you get fired
Yep. A recession is when you lose your job. A depression is when your bosses lose theirs.
Still not enough detail? Ok. Let’s do yesterday’s US Recession Report that smoked Bond Yields:
A) USA’s ISM Manufacturing report collapsed from 49.0 (already in contraction) in SEP to 46.7 in OCT
B) NEW ORDERS crashed to a new 6-month low of 45.5 (14th straight month of contraction)
C) EMPLOYMENT collapsed, finally, as well to 46.8, down a big 4.4 points from SEP to OCT
So, Foxy, you want me to go down the rabbit hole on the UAW strike? We can do a call on that later if you’d like. For now, I need to read and react to what markets are “pricing in” and/or think they should expect from here on this Rates Move.
Did the Fed say they’re going to CUT rates? A: nope.
If anything (and I’m pretty hawkish on INFLATION being HIGHER FOR LONGER), Powell was more hawkish than I was expecting him to be yesterday. So you got your Down Bond Yields, Chase Mega Cap Trade (Mega #BubbleCap was +2.7% on the day)…
But AAPL still has to report reality tonight.
Oh, gosh darnit little Foxy, are we still with the Tourists with our head buried in Bond Yield rabbit holes? Hedgeye Guy here says the thing about recessions is that companies have to report their ROC realities too.
Did you see what happened to the cool “compounder” Software thing called Paycom (PAYC) yesterday? It crashed -39%, in a day. Cramer’s “Investing Club” was probably long it.
You know that things like buying Software, paying for incremental Advertising, etc. are discretionary budget items that don’t get bought as companies experience recessions in their P&L’s right?
Back to the US Recession.. quickly, but succinctly, with math instead of “feelings” and narratives:
A) Our Nowcast for US GDP is -0.55% q/q SAAR for Q4 of 2023
B) Our Nowcast for US GDP is -0.51% q/q SAAR for Q1 of 2024
Yep. Those would be back-to-back quarters of negative GDP and every hedgehog paying Hedgeye knows what that is.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 30yr Yield 4.87-5.12% (bullish)
UST 10yr Yield 4.69-4.99% (bullish)
UST 2yr Yield 4.93-5.15% (bullish)
High Yield (HYG) 71.30-73.11 (bearish)
SPX 4097-4278 (bearish)
NASDAQ 12,435-13,231 (bearish)
RUT 1 (bearish)
Tech (XLK) 159-168 (bearish)
Shanghai Comp 2 (bearish)
DAX 14,608-15,217 (bearish)
VIX 16.56-22.78 (bullish)
USD 105.49-106.99 (bullish)
Oil (WTI) 79.08-85.19 (neutral)
Nat Gas 2.95-3.75 (bullish)
Gold 1 (bullish)
Copper 3.53-3.70 (bearish)
Silver 22.53-23.74 (bullish)
AAPL 165-177 (bearish)
Bitcoin 32,970-35,765 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
