• It's Coming...

    MARKET EDGES

    Identify global risks and opportunities with essential macro intel using Hedgeye’s Market Edges.

Since my prior note, “Dollar Down = Stocks Up”, intraday the US Dollar has declined further, and the stock market has rallied higher. This USD/SP500 inverse correlation continues to fortify itself. Unfortunately, for the past 3 months, American Industrial exporters have been on the other side of this (Dollar Up = Exports Down). President Obama, please write this down and ask Timmy G. if he gets what a strengthening US Dollar does when China is the Client (PS: the Client shops elsewhere).

Looking at February US Industrial Production stats, you can see how US Exports get choked off by a strengthening USD (in February the US Dollar Index remained strong). At down -11.2% year over year, this chart (see below) is quite nasty. If we don’t break the buck’s upward momentum, sustainably, expect more of the same here.

Interestingly, within this IP report was the lowest capacity utilization number the US Industrial base has printed since 1982 (just under 71%). If you don’t deflate the Dollar, you get deflation. That’s bad. Stopping deflation starts with starting to break the buck.
KM

Keith R. McCullough
CEO & Chief Investment Officer