“Why is the NFL’s greatest-ever receiver doing this?”
-Coach Bill Walsh
One of the best #behavioral chapters in one of the best coaching books I’ve ever read (The Score Takes Care Of Itself) is titled “How You Get Good – No Mystery To Mastery”:
“If you’re Jerry Rice, the greatest receiver in NFL history and, according to some, the greatest player, you’re practicing a slant pass pattern at 6AM over and over with nobody within a mile of you – no football, no quarterback, nobody but Jerry working to improve, to master his profession.” (pg 185)
In other words, “Jerry Rice understands the connection between preparation and performance.” I think many of you do too. The Question is are you willing to put in the real work?
Back to the Global Macro Grind…
For me, the real work is doing ALL the reps. It’s doing it EVERY day. It’s deliberate and it’s disciplined. It’s all executed within the framework of a data-driven and rules-based #process.
There is no emotion. There are no narrative drifts. There are just numbers.
Sometimes Player Coaches like me need to make up who the “other team” is. That’s not because we’re mean. It’s because we want/need someone to play against. That’s why I call them Macro Tourists.
BREAKING: “stocks rally on benign inflation report.” -Old Wall Media
That is precisely what I want/need the other team to “feel” and “believe” in order to have a shot at building my hard-earned Pile to new all-time highs.
If there’s one thing Tourists have had dead wrong since FEB, it’s their CPI Narratives…
We have a 150 slide deck of Global Data & Nowcasts to review both #HFL (higher for longer on INFLATION) and the impact a Global Economic Acceleration (from its 2023 Recessionary Cycle Lows) has on INFLATION. We'll review that entire slide deck LIVE at 11AM ET on @HedgeyeTV in our Mid-Quarter Macro Themes Update (ping for access).
But, for those of you who want the short-cut to the “call” on US CPI, here it is:
- CPI bottomed in June of 2023 at 2.97%
- CPI has #accelerated to 3.4% from there (and from +3.1% in JAN 2024)
- Our CPI Nowcast is for INFLATION to #accelerate to +4.1% by Q1 of 2025
If you have friends who’d prefer their narrative to play out, here’s the Old Wall Consensus on CPI:
- CPI to fall from 3.4% (that’s where they’ve had to take their numbers up to in Q2) to 3.1% in Q3
- CPI to fall from 3.1% in Q3 to 2.90% in Q4
- CPI to keep falling towards their “target” to 2.6% by Q1 of 2025
Two different teams with two completely different forecasts on INFLATION.
What’s the difference between 2.6% and 4.1%? A: A LOT!
We’ve played The Game against both the Fed and their fans before. Long-term #HedgeyeNation faithful (we sincerely appreciate you subscribing to our #process) recall WHEN:
A) In Q2 of 2021 our CPI Nowcast was breaking out towards the 4-handle… and
B) The Fed called it “transitory”… and in the next 3 quarters CPI went from 4.85% to 7.96%!
Headline INFLATION (CPI) ultimately peaked at +9.1% in June of 2022 and the rest of both the Fed and the Old Wall’s ability to accurately measure and map inflation is (not a good) history…
For those of you who have Old Wall friends who are still on the Tourist team, you should send them this note. Hugs and kisses from a former average-at-best-hockey player called Mucker, eh!
In all seriousness, if/WHEN the other team gets this wrong again, there’s RISK to the UPSIDE in our INFLATION Nowcasts! Huh? Just look at what happened yesterday:
A) USD and Bond Yields go down
B) INFLATION go up!
While it was a good day for the Old 60/40 Portfolios and SPY (which hit an all-time high), the real juice was in owning INFLATION. Something that only goes vertical with #Quad2 Inflation is Silver (SLV) which was up +4% on the day!
On Bond Yields:
A) My UST 2s and 10s Risk Range™ Signals are AT the LRR (low-end of the Risk Ranges)
B) My 2yr Yield TREND Level held = 4.61%
C) My 10yr Yield TREND Level held = 4.24%
More importantly, my long-term TAIL Level for the UST 10yr Yield underpins the TREND at 4.16%.
If those TREND and TAIL Levels break, I’ll assume the other team’s CPI forecasts are becoming more right and that I’m about to be wrong (in which case, I’ll stop myself out and get on the right side of The Market’s Signals).
If they don’t, and we’re right on INFLATION #accelerating back to 4%, I don’t think we’ll see a 10yr Yield below 4%. I think it will be heading back towards 5%.
All the while, I’ll be running my early morning looks and doing my macro grind. Some of these Old Wall forecasters live within a mile of me. But their lights are always off when I’m doing the real work.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 30yr Yield 4.47-4.72% (bullish)
UST 10yr Yield 4.32-4.59% (bullish)
UST 2yr Yield 4.72-4.94% (bullish)
High Yield (HYG) 76.74-77.65 (bullish)
SPX 5117-5333 (bullish)
NASDAQ 16,075-16,839 (bullish)
RUT 2037-2128 (bullish)
Tech (XLK) 200-215 (bullish)
Insurance (IAK) 112.63-117.55 (bullish)
Energy (XLE) 92.22-95.19 (bullish)
Basic Materials (XLB) 89.14-93.16 (bullish)
VIX 12.05-14.62 (bearish)
USD 104.15-105.75 (bullish)
EUR/USD 1.071-1.089 (neutral)
USD/YEN 153.42-157.04 (bullish)
Oil (WTI) 78.02-80.95 (bullish)
Nat Gas 2.05-2.47 (bullish)
Gold 2 (bullish)
Copper 4.52-5.05 (bullish)
Silver (SLV) 27.07-30.13 (bullish)
Bitcoin 58,721-66,864 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
