“On the steppes of Africa, a ‘dance of death’ occurs when a wildebeest is run into exhaustion by a lion.”
-Bill Walsh
Jay Powell is officially a wildebeest this morning. He’s going to get run into exhaustion by a lion called #HFL.
“Waiting to be killed as the lion circles, the wildebeest meekly submits to its fate – head drooping, shoulders slumped, eyes glazed over. It is the posture of the doomed.” -The Score Takes Care Of Itself, pg 157
I dare him to try to run from the lion (and cut rates). That’s only going to deliver #HFL faster.
Back to the Global Macro Grind…
Welcome to another Macro Monday @Hedgeye where we’ll continue to measure and map Global Macro markets for you. You might think of The Bond Market as the lion this morning too.
Let’s start with a review of the Global Currency Market:
- US Dollar Index corrected -0.2% last week, providing us a Buying Opportunity = Bullish TRADE and TREND
- EUR/USD bounced +0.2%, providing us a Selling Opportunity = Bearish TRADE and TREND
- Yen was down -0.1% vs. USD to -4.9% in the last 3-months alone = Bearish TRADE and TREND
- GBP/USD was down -0.2% after breaking bad back to bearish TRADE and TREND
- Canadian Dollar was down another -0.5% vs. USD and remains Bearish TRADE and TREND as well
- South Korean Won was -0.5% vs. USD to -2.8% in the last 3 months = Bearish TRADE and TREND
Since we’re long of South Korea’s Equity market via EWY, we’re cool with an exporter having “cheaper” goods. We’re cool with what both Doctors in Global Macro are prescribing too. We call it Global #Quad2.
Dr. KOSPI (South Korea’s Stock Market Index) and Dr. Copper continue to signal bullish on both our TRADE and TREND durations with Dr. Copper inflating, big time, last week alongside Commodities as an Asset Class:
- CRB Commodities Index inflated another +2.5% last week to +11.9% in the last 3 months
- Oil (WTI) inflated another +4.5% last week to +17.7% in the last 3 months
- Copper inflated another +5.7% last week to +11.3% in the last 3 months
- Coffee inflated another +12.5% last week to +16.2% in the last 3 months
- Lean Hogs inflated another +6.4% last week to +54.1% in the last 3 months
- Silver inflated another +10.4% last week to +18.0% in the last 3 months
Yep. I get it. Powell probably doesn’t eat Silver. But he should be long of it instead of trying to convince the rest of the wildebeest at The Fed that the lions aren’t hungry.
From their coffee to their chocolate (Cocoa is inflating another +3.5% this morning to +240% year-over-year), to their bacon and eggs, you’d think 1 of the 785 “economist” wildebeest at The Fed might notice what the Bond Market did?
A) UST 2yr Yield ramped another +12 basis points last week to +20 basis points in the last month
B) UST 10yr Yield ramped another +19 basis points last week to +26 basis points in the last month
How about US Equity Sector Styles? During a -1.0% correction week for SPY, being Long Inflation worked anyway:
A) Our Long Energy (XLE) Asset Allocation inflated another +3.9% last week to +15.8% in the last 3 months
B) Our Long Energy MLPs (AMLP) Asset Allocation inflated +0.7% last week to +11.2% in the last 3 months
Those Equity Sector Styles pounded something that’s Rate Sensitive to #HFL (Higher For Longer) like US Real Estate REITS (XLRE) which were down another -2.9% last week to -3.1% in the last 3 months.
Bottom line: get #HFL on both INFLATION and Rates right, you’re getting your #GoAnywhere Portfolio Solutions right.
In other Diversified Global Asset Allocation news:
- India’s Stock Market was up another +1.2% last week and is hitting new all-time highs this morning
- China’s Stock Market was up another +0.9% in Shanghai and continues to signal Global #Quad2
- The Dutch Stock Market barely corrected -0.1% last week and continues to signal Global #Quad2
As one of my Dutch friends likes to say, “if you ain’t Dutch, you ain’t much.” When I’m long of the Dutch via EWN, I can roll with that. I generally prefer to roll with the lions. It sure beats being a Fed Head drooping wildebeest these days.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 30yr Yield 4.35-4.61% (bullish)
UST 10yr Yield 4.21-4.47% (bullish)
UST 2yr Yield 4.54-4.80% (bullish)
High Yield (HYG) 76.61-77.50 (bullish)
SPX 5151-5286 (bullish)
NASDAQ 16,055-16,522 (bullish)
RUT 2032-2119 (neutral)
Tech (XLK) 203-211 (bullish)
Insurance (IAK) 114.47-117.80 (bullish)
S&P Momentum (SPMO) 78.75-81.12 (bullish)
Healthcare (PINK) 29.72-31.02 (bullish)
Shanghai Comp 2 (bullish)
BSE Sensex (India) 72,227-74,929 (bullish)
DAX 18,008-18,551 (bullish)
VIX 12.04-16.51 (neutral)
USD 103.70-104.93 (bullish)
EUR/USD 1.074-1.088 (bearish)
USD/YEN 151.06-152.21 (bullish)
GBP/USD 1.254-1.269 (bearish)
CAD/USD 0.733-0.740 (bearish)
Oil (WTI) 81.65-88.05 (bullish)
Gold 2196-2370 (bullish)
Copper 4.01-4.31 (bullish)
Silver (SLV) 25.05-28.21 (bullish)
Bitcoin 65,112-73,169 (bullish)
Best of luck out there this week,
KM
Keith R. McCullough
Chief Executive Officer
