“The Huns caused pure terror and are exceedingly savage.”
-Peter Frankopan
Have any of your friends recently called you a “savage”? My hockey Buds Brownie calls me one. It’s like Monthly #Quad2 breakouts to all-time SPY, QQQ, and NVDA highs. It’s a thing!
If you’ve been a savage, buying every damn dip in Commodities & Cyclicals in particular, #WellDone. You’re getting your family’s hard-earned capital paid. If you have an awareness of history, you know things could be much worse for The Fam!
As Frankopan goes on to remind us in The Silk Roads, “In the middle of the 5th century The Huns themselves appeared in Europe, led by the most famous figure of late antiquity: Atilla… trained from youth to cope with extreme cold, hunger, and thirst, they dressed in the skins of field mice – they would eat roots and raw flesh.” (pg 48). #Savages!
Back to the Global Macro Grind…
Now that you’re “feeling” a little savage this morning, get out there and buy the damn dips in Europe.
That’s right. Don’t be afraid of a “hot CPI” out of the UK. Use their mini-version of a Macro Tourist Day in London as a Buying Opportunity. Here’s what The MFO (Mucker Fam Office) is buying:
- France (EWQ), which is a new Asset Allocation in Portfolio Solutions as of this morning
- Spain (EWP), which currently ranks #1 of 4 in terms of Risk Range™ Signal Strength
- Dutch Stocks (EWN) and German Stocks (EWG) which round out our Top 4
While Long Europe has been good to us, being Long of INFLATION via Commodities and their related US Equity Exposures has been the most savage place to be for the last 3 months.
Here are the Top 5 performing ETFs (with some obvious groupings) in the world:
- Silver Miners (SLVP, SILJ, SIL) are up +55-63%
- Gold Miners (GDMN, GDXJ, GOAU) are up +45-55%
- Copper Miners (COPJ, COPX) are up +44-46%
- European Carbon (KEAU) is up +42%
- Silver (SLV) is up +42% as well
‘Oh, but “inflation is benign”, KM.’
Yeah and yellow snow is what you should look for first if you’re a starving Hun who comes across a European kitchen.
So how did that “benign inflation” narrative play out from last week’s Macro Tourist Day (CPI day)?
A) Fed Policy Expectations (i.e. the Short-End of The Curve) popped +13 basis points on UST 2s
B) BOE (UK) Policy Expectations just ramped +10 basis points this morning alone on UK 2yr Gilts
‘Dammit, Mucker – here come the Hedgeye Huns again!’
Yes, my friends, here it comes – the far-reaching implications of #HFL (higher for longer) on INFLATION. As I explained during last week’s Q2 Macro Themes Deck presentation:
A) If our Street High INFLATION Nowcasts are right, and headline INFLATION is heading towards 4% instead of 2%
B) And, I can’t get the 2yr UST Yield to break-down below 4.5%, never mind 4%...
C) Then, I say you better stay Long of INFLATION before it eats your hard-earned capital alive
#Savage, indeed.
What are some other particularly important #HFL @Hedgeye TREND Signals that are tethered to my FX, Bond Yield, and Commodities Signals?
A) Treasury Bond Market Volatility (MOVE Index) broke @Hedgeye TREND Signal support (again) in May
B) Both High Yield (HYG) and Investment Grade (LQD) Credit continue to signal Bullish TREND
My read-through on those 2 Signals is that the Bond Market has it right (again) on the Short-End of The Curve as it’s only “pricing in” the SEP Fed Rate Cut and not much beyond that.
Btw, in case you didn’t read it the way the UK Bond Market did this morning, that was “priced” the same way, taking 1 BOE Rate Cut “out” of the market’s price (meaning the BOE could/should be 1 and done on cuts too).
A #HFL (higher for longer) LEVEL of INTEREST RATES is consolidating my UST 2yr and UKT 2yr Risk Range™ Signals (again) this morning. That keeps Corporate Spread Risk LOW which, in #Quad2, means it’s ok to buy HYG and LQD.
Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 10yr Yield 4.35-4.55% (bullish)
UST 2yr Yield 4.75-4.94% (bullish)
High Yield (HYG) 76.78-77.56 (bullish)
Investment Grade (LQD) 106.03-107.89 (bullish)
SPX 5190-5365 (bullish)
NASDAQ 16,294-16,976 (bullish)
RUT 2047-2124 (bullish)
Tech (XLK) 205-217 (bullish)
Basic Materials (XLB) 90.88-93.03 (bullish)
Shanghai Comp 3115-3188 (bullish)
BSE Sensex (India) 72,507-74,376 (bullish)
DAX 18,616-18,858 (bullish)
VIX 11.34-13.85 (bearish)
USD 104.21-105.41 (bullish)
USD/YEN 154.65-157.34 (bullish)
GBP/USD 1.249-1.279 (bullish)
Oil (WTI) 77.51-80.27 (bullish)
Nat Gas 2.22-2.82 (bullish)
Gold 2 (bullish)
Copper 4.64-5.25 (bullish)
Silver (SLV) 28.50-33.01 (bullish)
NVDA 876-975 (bullish)
Bitcoin 62,899-72,890 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
