“We kind of wake up every day and are very reactive to the situations that happen to us in our life…”
-Tom Brady
In an excellent #behavioral book a client sent me called The Right Call: What Sports Teach Us About Work And Life, Brady goes on to say that “you end up never really gaining ground on what’s important.” -Sally Jenkins, pg. 3
Back to the Global Macro Grind…
It’s another Macro Monday @Hedgeye. As a firm, we’ll be sharing some tragic news later this morning. All I can say about that is hold those who are close to you tight and know what’s important in your life.
There is no transition sentence from that. Here’s your weekly review of the Global Currency Market:
- US Dollar Index was down -1.4% last week after breaking bad to Bearish on both our TRADE and TREND Signals
- EUR/USD was up +1.4%, moving back to Bullish TRADE, but remains Bearish from a TREND perspective
- Japanese Yen was up another +1.9% after breaking out to Bullish TRADE and TREND vs. USD
- GBP/USD was up another +1.2% last week and remains Bullish TRADE and TREND = Core FX Asset Allocation
- Canadian Dollar was +1.6% vs. USD last week, moving back to Bullish TRADE, but remains Bearish TREND
- Norwegian Krone was up a big +3.9% vs. USD on a Bearish to Bullish TREND breakout as well
Why all the breakouts vs. USD? A: The Fed.
Is that going to help The People in the US Labor Market who are losing their jobs? A: Nope. A weakening US Dollar weakens the purchasing power of The People.
How about Bond Yields? A: They continue to signal a US Recession:
A) SHORT-END (UST 2yr Yield) was down hard (-30 basis points) last week after breaking Long-term TAIL support
B) LONG-END (UST 10yr Yield) was down hard (-31 basis points) last week after breaking Long-term TAIL support
C) CURVE – 10s minus 2s re-inverted to -53 basis points. That’s -15bps more inverted in the last month
From our multi-duration, multi-factor Risk Management Model’s perspective, WHEN the long-term TAIL levels “break” matters… especially AFTER:
A) Immediate-term TRADE levels are already broken
B) Intermediate-term TREND levels are already broken
C) For the UST 2yr and 10yr Yields, long-term TAIL support levels = 4.45% and 4.01%, respectively
As that’s happening, big Rate Sensitive things like Gold (GLD) and Utilities (XLU) become bigger Asset Allocations. We currently have 28 Diversified Asset Allocations in our new Portfolio Solutions product that also includes:
A) India (INDA and SMIN) which was up another +2.4% last week to +9.3% in the last month
B) Philippines (EPHE) was up +3.9% last week to +5.0% in the last month
Emerging Markets, as an Asset Class, get much more attractive when A) USD is breaking down like this and B) where absolute and relative GDP growth rates #diverge vs. a recessionary US Growth Rate.
India just printed a monster +7.64% year-over-year GDP Growth rate in Q3 of 2023, for example. And our GDP Nowcast for the Philippines is also projected to #accelerate towards +5.45-5.93% in the 1st half of 2024.
China, whose stock market was down another -0.9% last week and sold-off to new 6-month lows this morning, remains in GDP freefall with our #Quad4 Nowcast #slowing to 2.65% year-over-year in Q124 vs. the 4.60% they made up in Q323.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 30yr Yield 3.97-4.42% (bearish)
UST 10yr Yield 3.86-4.33% (bearish)
UST 2yr Yield 4.32-4.83% (bearish)
High Yield (HYG) 74.95-77.25 (neutral)
SPX 4 (bullish)
NASDAQ 14,034-14,945 (bullish)
RUT 1 (bearish)
Tech (XLK) 182-194 (bullish)
Energy (XLE) 79.99-85.38 (bearish)
Utilities (XLU) 62.20-66.25 (bullish)
Shanghai Comp 2 (bearish)
Nikkei 32,361-33,301 (bearish)
BSE Sensex (India) 68,605-71,553 (bullish)
VIX 11.85-15.01 (bearish)
USD 101.22-104.18 (bearish)
EUR/USD 1.068-1.098 (bearish)
USD/YEN 140.80-146.41 (bearish)
GBP/USD 1.251-1.278 (bullish)
CAD/USD 0.731-0.750 (neutral)
Oil (WTI) 67.72-74.30 (bearish)
Oil (Brent) 72.21-78.51 (bearish)
Nat Gas 2.20-2.75 (bearish)
Gold 1 (bullish)
Copper 3.70-3.93 (bearish)
Uranium (URA) 28.15-29.81 (bullish)
Bitcoin 40,111-43,975 (bullish)
Best of luck out there this week,
KM
Keith R. McCullough
Chief Executive Officer
