(Excerpted from this morning's Hedgeye conference call)
These are interesting times for bearish market story tellers. They get one late Friday afternoon, light volume sell-off and now all of a sudden they’re asserting how they’ve been right all along. The reality is that what they have wrong, we have right, namely the emergence of #Growth Accelerating.
It would be disingenuous at best to suggest that bond yields aren’t ripping higher because growth is accelerating and that the Fed is going to likely begin to get out of the way for precisely that reason.
Don’t forget that back in March, and early April, people were poo-pooing the market rally saying, “I don’t like that the defensives—consumer staples and utilities—are leading." Well, now they’re lagging.
Only two of the nine S&P sectors in our model are broken from an immediate term trade perspective. You guessed it—Utilities (XLU) and Consumer Staples (XLP). What is leading now are pro-growth sectors like Financials (XLF). Utilities (which were down 9% in May) are bearish trade and trend. We would short them on a bounce.
The opportunity right now lies in taking advantage of the fear. Taking advantage of the fear that growth is going to surprise on the downside which it obviously has not.
