Hedgeye - Another Week of Broadening

“It is neither work nor play, purpose nor purposelessness, that satisfies us. It is the dance in between.”
-Bernard De Koven

So let’s keep dancing this morning. I consider it one of my life’s greatest blessings that I get to wake up and do what I do every day of my life. For the most part, I don’t think about it as work – it’s my passion.

The aforementioned quote comes from a good chapter in Hidden Potential by Adam Grant. It’s titled “Transforming The Daily Grind – Infusing Passion Into Practice.” (pg 87)

It’s almost as if Grant curated that title for the most passionate members of our community. Long live the Go Anywhere #FullInvesting Cycle process of #HedgeyeNation!

Back to the Global Macro Grind…

Welcome to another Macro Monday @Hedgeye where it’s time to grind. We’ve already put in the weekend “work”, so let’s incorporate any TRADE and/or TREND Signal changes into our decision-making process.

Let’s start with reviewing the Global Currency Market moves from last week:

US Dollar Index was down for the 2^nd straight week (down a small -0.1%) and remains Bullish TREND
EUR/USD was +0.1% and moves back to Neutral TREND @Hedgeye this morning (and Bullish TRADE)
Japanese Yen was +0.3% last week vs. USD but remains Bearish on both TRADE and TREND durations
GBP/USD was -0.2% last week and remains Neutral TREND this morning
Canadian Dollar was down another -0.4% vs. USD last week and remains Bearish TRADE and TREND
Russian Ruble was +3.4% vs. USD last week but remains Bearish TRADE and TREND as well

Other than a Counter @Hedgeye TREND bounce, what’s the Russian Ruble signaling? A: I don’t know (yet), but I do know that it moved and I’m monitoring both it and the Russian Stock market for geopolitical risk signals.

While the US Dollar Index remains Bullish TREND (mainly because of its strength vs. a devalued Yen), it’s signaling LOWER-highs almost daily now in my Risk Range™ Signal. That could be the beginning of something new:

A) As the US economy starts to re-accelerate into #Quad2 in May, USD could/should break down
B) That the Fed is actually going to cut rates in June despite our Nowcast for re-accelerating inflation

Irrespective of A) and/or B) playing out, Global Macro markets are doing what they do on Inflation Expectations, bidding them higher via Bitcoin, Crypto, and Commodities:

A) Bitcoin (Long IBIT) mooooned it for us, reflating +22.9% last week to +45.1% in the last month!
B) CRB Commodities Index (19 Commodities) reflated +2.3% breaking out back to Bullish TREND
C) Oil (WTI) reflated another +4.6% last week to +8.4% in the last month and remains Bullish TREND

We know why Bond Yields weren’t “up” on that. The US Consumption and Cyclical Growth Data continued to #slow against VERY difficult monthly JAN and FEB comps. But those monthly Quad Comps start easing now.

While the politicized Fed Heads like Austan Goolsbee are still calling it “goldilocks” for inflation, here’s what other key Commodities did last week:

A) Corn (which we have been short) popped +2.7% last week to -5.0% in the last month
B) Cotton inflated another +2.2% last week to +10.5% and +20.3% in the last 1 and 3 months, respectively
C) Cocoa inflated another +1.1% last week to +27.7% and +50.6% in the last 1 and 3 months, respectively

Then, of course, US Stocks continued to inflate!

SPY was +1.0% last week to +4.7% in the last month and a new all-time closing high Friday
NASDAQ Comp Index was +1.7% last week to finally eclipse its 2021 all-time closing high
Russell 2000 was +3.0% last week and finally broke out to Bullish @Hedgeye TREND

The Russell 2000 (IWM) is still, of course, down -15.0% from its 2021 all-time closing high because it remains in an Earnings Depression. But damn the details. The only thing I really care about is A) my Signal and B) what I’m long!

As a reminder, on the only correction we’ve seen in the last 3-4 weeks, we added the Russell Growth (IWO) ETF to our Core Asset Allocation (see Portfolio Solutions product) Model.

In terms of US Equity Factor Exposures, the 2 places to be continued to be HIGH BETA and GROWTH:

A) HIGH BETA was +2.8% last week vs. LOW BETA at -0.7%
B) HIGH (Sales) GROWTH was +2.4% last week vs. Slow Sales GROWTH at +0.5%

So people can whine or celebrate whether they are properly positioned. Personally, I feel nothing other than we did our Full Investing Cycle job, making the Asset Allocation pivots that the #process perpetuated.

On that score, here’s a little-known back-slapping fact for my #VASP (Vol Adjusted Signaling Process) that had us buying Momentum in November of 2023 (after avoiding the AUG to OCT 2023 -18% drawdown in the Russell):

A) Long Momentum (SPMO) = +27.7% vs.
B) Long SPY Monkey (SPY) = +12.4%

Not bad, eh? Long the MoMo while calling it the #MOAB was even better than our Long India (INDA) Asset Allocation which also hit an all-time high last week.

We got Long India (INDA) in June of 2023. It’s +22.8% since vs. SPY +18.2% over the same time. That said, since I have a Go Anywhere Global Macro Strategy, SPY Monkey isn’t my “bench.”

Something with Lower Volatility and more Diversification across Asset Classes (like 60/40 Strategies) in your hard-earned capital’s retirement account would be.

Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets

UST 10yr Yield 4.18-4.37% (bullish)
UST 2yr Yield 4.52-4.75% (bullish)
SPX 4 (bullish)
NASDAQ 15,725-16,399 (bullish)
RUT 1 (bullish)
Tech (XLK) 202-212 (bullish)
Insurance (IAK) 109.21-112.37 (bullish)
S&P Momentum (SPMO) 73.72-79.44 (bullish)
Healthcare (PINK) 29.45-30.70 (bullish)
Shanghai Comp 2 (bullish)
BSE Sensex (India) 72,271-73,916 (bullish)
VIX 12.44-15.65 (bearish)
USD 103.58-104.36 (bullish)
EUR/USD 1.075-1.087 (neutral)
USD/YEN 149.74-151.08 (bullish)
GBP/USD 1.261-1.272 (neutral)
CAD/USD 0.734-0.741 (bearish)
Oil (WTI) 76.80-80.20 (bullish)
Gold 2023-2099 (bullish)
Copper 3.80-3.92 (bullish)
MSFT 403-419 (bullish)
AAPL 177-184 (bearish)
AMZN 169-182 (bullish)
META 466-505 (bullish)
GOOGL 133-142 (bearish)
TSLA 190-207 (bearish)
NVDA 711-862 (bullish)
Bitcoin 54,552-68,370 (bullish)

Best of luck out there this week,

Keith R. McCullough
Chief Executive Officer