“Milton Friedman isn’t running the show anymore.”
-Joe Biden
That’s right, Joe. On The Big G, you’re running it up!
On running up the US Deficit and Government Debt, it’s going to be a record year in America. Public-Sector jobs as a percentage of US Payroll gains ramped to record highs but now American Job Cuts are running up +115% year-over-year.
This is what we call a Major Macro #Divergence. You’re seeing that politically (and obviously) too. “For a time – and even today – Friedman’s name conjured not just a person, but an entire constellation of ideas… crafting the basic intellectual consensus about free markets and limited government that powered 20th Century American Conservatism.” -Jennifer Burns, page 1
Back to the Global Macro Grind…
Welcome to another Macro Monday @Hedgeye where both Macro Markets and the US Debt Clock are still ticking. In the 6 weeks since our initial Q4 Macro Themes Deck, US National Debt has grown from 33.1 TRILLION towards 33.9 TRILLION.
All good, eh?
Instead of getting into the politics of it all, let’s just stay with what we do best: The ROC (Rate of Change) of it all. While US Government hiring and spending was the “hero” of 2023, now its tailwinds to “Soft Landings” are turning into headwinds.
As you can see in today’s Chart of The Day, The Big Biden G has its Base Effects Broadly Steepening Through Q3 of 2024.
USA isn’t the only major country doing this. Actually, most major countries are doing it because they don’t know what else to do. Here’s your Global Currency Market update to go alongside The Big Global G:
- US Dollar Index bounced +0.7% last week after holding @Hedgeye TREND support, but remains Bearish TRADE
- EUR/USD was down -0.6% after Breaking Bad (again) back to Bearish on both our TRADE and TREND durations
- Japan’s Yen ramped +2.2% vs. USD last week after breaking out to Bullish on both our TRADE and TREND durations
- GBP/USD corrected -0.7% within its newfound Bullish TRADE and TREND Signals
- Canadian Dollar was down another -0.5% vs. USD and remains Bearish TRADE and TREND
- Norwegian Krone was down another -1.6% vs. USD and remains Bearish TRADE and TREND as well
What do Canada and Norway have in common other than being Northern Big G Spending countries? A: Oil. Both currencies continue to partly reflect CRASHING Oil & Gas prices. That’s what happens when demand becomes recessionary.
*Asset Allocation Moves: bought the dip in the British Pound (FXB) late last week and remain #out of Oil, Gas, and Energy Stocks.
How about those Global Divergences? Long AAPL (because it has guided to ZERO Growth) vs. Short Commodities? Cool:
- CRB Commodities Index (19 Commodities) was down another -2.9% last week and remains Bearish TRADE and TREND
- Oil (WTI) was down another -3.8% last week to -16.3% in the last 3 months and remains Bearish TRADE and TREND
- Dr. Copper was down -2.6% last week after failing @Hedgeye TREND resistance
- Natural Gas was down another -8.3% last week to -23.8% in the last month alone
And now (as in right now, this morning), Natty Gas is down another -7% taking its #Quad4 Crash to -31% since OCTOBER!
You know what #Quad4 is, right? You’re either in a DISINFLATING #Quad4 where INFLATION goes (like in the USA) from Cycle Peaks in 2022 to lower ROCs (Rates of Change) in 2023 … or in DEFLATIONARY #Quad4:
China’s CPI for NOV was a DEFLATIONARY -0.5% year-over-year vs. -0.2% in OCT, for example. And we remain Short of China via both CHIQ (China Consumer) and the Hang Seng (EWH) which was down another -3.0% last week, crashing to new #Quad4 Cycle Lows.
Again, some things are going vertical to ALL-TIME highs (like India’s Stock Market, which was up another +3.2% last week and we remain LONG of via INDA and SMIN), whereas other BIG things are CRASHING. Those are called Major Macro #Divergences.
What to do with them? A: Risk Manage them.
Since I don’t run my family’s hard-earned capital on a “YTD” SPY number (forgetting last year’s YTD and trumpeting this year’s) and/or an Old Wall 60/40 “Portfolio” split, I just get rid of things that are signaling recession and ride things that aren’t.
It’s not just major Global Macro Asset Classes that are diverging (and therefore presenting Long and Short Opportunities). US Equity Sector Styles are showing major #divergences as well:
A) US Energy (XLE) and Basic Materials (XLB) Stocks were down -3.3% and -1.7% last week, respectively vs.
B) US Tech (XLK) and Consumer Discretionary (XLY) Stocks were up +1.2% and +0.6% last week, respectively
As you can see in our Risk Range product, Energy (XLE) remains Bearish TREND and widely held #BubbleCap Tech (XLK) remains Bullish TREND. After buying the damn dips in XLG and SPMO early last week, I just gotta ride these Bulls until I impale myself, I guess.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 30yr Yield 4.18-4.59% (bearish)
UST 10yr Yield 4.10-4.45% (bearish)
UST 2yr Yield 4.56-4.86% (bearish)
High Yield (HYG) 74.65-76.17 (bearish)
SPX 4 (neutral)
NASDAQ 14,002-14,495 (bullish)
RUT 1 (bearish)
Tech (XLK) 182-188 (bullish)
Energy (XLE) 80.78-84.40 (bearish)
Utilities (XLU) 62.08-63.99 (bullish)
Shanghai Comp 2 (bearish)
BSE Sensex (India) 66,895-70,993 (bullish)
VIX 12.25-15.38 (neutral)
USD 102.70-104.62 (neutral)
EUR/USD 1.069-1.098 (bearish)
USD/YEN 144.12-148.96 (bearish)
GBP/USD 1.249-1.274 (bullish)
CAD/USD 0.732-0.741 (neutral)
Oil (WTI) 67.51-76.01 (bearish)
Oil (Brent) 72.16-80.44 (bearish)
Nat Gas 2.36-2.90 (bearish)
Gold 1 (bullish)
Copper 3.70-3.92 (bearish)
Silver 23.01-26.39 (bullish)
Uranium (URA) 27.91-29.62 (bullish)
Bitcoin 40,146-45,605 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
