Client Talking Points
Boom! 4.1% US GDP growth for Q313. Just unbelievable. Remember the call consensus US stock market bears (and Gold Bond bulls) completely missed in 2013? Exactly. #RatesRising mapped US #GrowthAccelerating from 0.14% to 4.1% like a Hedgeye glove. US GDP at this time last year (Q412) was 0.14% - this acceleration was epic. Of course, beware of growth slowing from here.
This is the first up week for US Dollar in six. That matters, big time, to how Global Macro trades. Right now 8 of 9 sectors in our Hedgeye S&P Sector Model are bullish on both our TRADE and TREND durations. What's the market story of 2013? Buy-the-Damn-Bubble #BTDB on red! Just an epic year to be long growth, as an investment Style Factor. Our Hedgeye SPX range is 1792 - 1821.
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Top Long Ideas
Our bullish call on the British Pound was borne out of our Q4 Macro themes call. We believe the health of a nation’s economy is reflected in its currency. We remain bullish on the regime change at the BOE, replacing Governor Mervyn King with Mark Carney. In its October meeting, the Bank of England voted unanimously (9-0) to keep rates on hold and the asset purchase program unchanged. If we look at the GBP/USD cross, we believe the UK’s hawkish monetary and fiscal policy should appreciate the GBP, as Bernanke/Yellen continue to burn the USD via delaying the call to taper.
WWW is one of the best managed and most consistent companies in retail. We’re rarely fans of acquisitions, but the recent addition of Sperry, Saucony, Keds and Stride Rite (known as PLG) gives WWW a multi-year platform from which to grow. We think that the prevailing bearish view is very backward looking and leaves out a big piece of the WWW story, which is that integration of these brands into the WWW portfolio will allow the former PLG group to achieve what it could not under its former owner (most notably – international growth, and leverage a more diverse selling infrastructure in the US). Furthermore it will grow without needing to add the capital we’d otherwise expect as a stand-alone company – especially given WWW’s consolidation from four divisions into three -- which improves asset turns and financial returns.
Financials sector senior analyst Jonathan Casteleyn continues to carry T. Rowe Price as his highest-conviction long call, based on the long-range reallocation out of bonds with investors continuing to move into stocks. T Rowe is one of the fastest growing equity asset managers and has consistently had the best performing stock funds over the past ten years.
Three for the Road
QUOTE OF THE DAY
"The greatest danger for most of us is not that we aim too high and we miss it, but we aim too low and reach it." - Michelangelo
STAT OF THE DAY
The S&P 500 has rallied 27 percent so far in 2013, on course for its best performance since 1997. Three rounds of central-bank bond purchases have helped propel the equity benchmark 167 percent higher from a 12-year low in 2009. (Bloomberg)