“From the beginning of time, the center of Asia was where empires were made.”
-Peter Frankopan

Especially for those of you who invest in Global Commodity Inflation during Global #Quad2, Frankopan wrote an important #history book in 2015 titled The Silk Roads. It’s not the #history most will learn in the West.

“The alluvial lowlands of Mesopotamia, fed by the Tigris and Euphrates, provided the basis for civilization itself – for it was in the region that the first cities and towns took shape.” (pg 1)

No matter what someone is trying to tell you about “PCE” and INFLATION today, we’re going to remain Long of it. China reported another #acceleration in its PMI reports for the month of March, right on time for Global #Quad2.

#Quad2 Broadening, Globally - Longhorn

Back to the Global Macro Grind…

Welcome to another Macro Monday @Hedgeye. Instead of relying on narratives to tell you what markets “should” do, we’re focused on measuring and mapping what markets (and inflation) are actually doing.

As a matter of #process, we like to start with a review of Global Currency Markets:

  1. US Dollar Index was up +0.1%, holding onto its recent breakout on our TRADE and TREND durations
  2. EUR/USD was down -0.1% and remains Bearish on both our TRADE and TREND durations
  3. Yen was flat vs. USD last week and remains Bearish TRADE and TREND (-6.9% in the last 3-months)
  4. GBP/USD was +0.2% last week but also remains Bearish TRADE and TREND
  5. Mexican Peso was +0.6% vs. USD last week to +2.8% in the last month = Bullish TRADE and TREND
  6. Swedish Krone was -1.3% vs. USD last week to -3.2% in the last month = Bearish TRADE and TREND

Why do we care about what’s going on in Sweden, Mexico, etc.? A: Why wouldn’t we? After being short of Sweden (EWD) before the country entered its 2023 Recession, we are Long of it now with a weakening currency.

Isn’t it fascinating to listen to people on the Old Wall talk about where they “feel” US Inflation is headed next, without a clue on what’s happening in Global Inflation and/or Real Growth?

Your local CNBC SPY Monkey wouldn’t know this, but A) we had a Global Industrial & Manufacturing Recession and B) it likely bottomed in Q4 of 2023.

If you were long China and/or Commodities from their 2021 highs to 2023 lows, you “felt” that!

While we were Net Short Commodities (and China) over that Full Investing Cycle, we are long of both China and Commodities now. Here’s how Global Commodities did last week (hint: better than most Equity Indices):

  1. CRB Commodities Index inflated another +1.6% last week to New Global #Quad2 Cycle Highs
  2. CRB Foodstuffs Index inflated another +0.9% last week to +12.2% in the last 3 months
  3. Oil (WTI) inflated another +3.2% last week to +15.1% in the last 3 months = Bullish TRADE and TREND
  4. Copper consolidated recent gains and was flat last week but is also now Bullish TRADE and TREND
  5. Cocoa inflated +9.3% last week to +62.9% and +129.5% in the last 1 and 3 months, respectively
  6. Lean Hogs inflated +1.8% last week to +18.0% and +48.2% in the last 1 and 3 months, respectively

Evidently it takes 785 “economists” at the Fed to “feel” like the recent re-acceleration in inflation could be “transitory” (again). I don’t feel anything at all about this other than my portfolios inflating.

Q: when both Gold and SPY inflate to all-time highs, is that inflationary or deflationary?

It’s not just Gold that’s joined the recent #Quad2 Broadening, Globally. We’re long Silver (SLV), Saudi Arabia (KSA), Housing (ITB), Shipping (BDRY), Gasoline (UGA), Bitcoin (IBIT), etc. in our Portfolio Solutions product.

There are plenty of Cyclical & Small Cap Stocks that have broken out from Bearish to Bullish @Hedgeye TREND Signal Strength Stocks (another new product that has 69 hot Stock Picks! on our list for you today too).

While we were Short “Broadening” (because it kept working) for most of 2023, we pivoted to long of it WHEN The Full Investing Cycle turned in recent months:

A) In the last 3 months, 77% of Stocks in the SP500 are up an average of +12.6%
B) We’re already up almost +8% since adding the Russell 2000 GROWTH (IWO) to Portfolio Solutions

“Oh, but you… you marketing machine Mucker, you… you were bearish… and”…

And what? Are you going to rain down on me like Pharoah tried on Moses or what? On most of the things I’m long now, I should have been bearish!

Here are two examples of big US Equity Sector & Factor Exposures that went from Bearish to Bullish TREND:

A) The Russell 2000 (IWM TREND Breakout Level = $204) was up another +2.5% last week
B) US Large Cap Energy (XLE TREND Breakout Level = $86.13) was up another +2.2% last week

It’s a good thing the Old Wall Elites can’t send Genghis Khan after me for choosing IWO over IWM!

Users of the Go Anywhere (flexibility and mobility: that’s what made the Mongols so effective during their 11-12th century Global Power reign) Full Investing Cycle #process know there’s been a Broadening in Global Equities too.

Long Germany’s DAX and India’s BSE Sensex Indices were up another +1.6% and +1.4% for us last week.

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

UST 10yr Yield 4.15-4.35% (bullish)
UST 2yr Yield 4.47-4.75% (bullish)
High Yield (HYG) 77.02-77.55 (bullish)
SPX 5145-5293 (bullish)
NASDAQ 16,100-16,563 (bullish)
RUT 2064-2145 (bullish)
Insurance (IAK) 113.67-117.78 (bullish)
S&P Momentum (SPMO) 78.97-81.45 (bullish)
Healthcare (PINK) 29.95-31.22 (bullish)                                               
Shanghai Comp 2 (bullish)
BSE Sensex (India) 72,003-74,258 (bullish)
DAX 17,877-18,616 (bullish)
VIX 12.23-14.25 (bearish)
USD 103.16-104.97 (bullish)
EUR/USD 1.076-1.091 (bearish)
USD/YEN 150.23-152.31 (bullish)
GBP/USD 1.252-1.277 (bearish)
Oil (WTI) 80.34-84.11 (bullish)
Gold 2156-2275 (bullish)
Copper 3.95-4.14 (bullish)
Bitcoin 66,203-71,991 (bullish)

Best of luck out there this week,

KM

Keith R. McCullough
Chief Executive Officer

#Quad2 Broadening, Globally - Cotd1