So...U.S. Q4 GDP was revised sharply down this morning from 3.2% to 2.4% in the latest sign of slowing economic growth. For the record, we were virtually alone in our #GrowthSlowing macro call made back a couple weeks before Christmas.
Here's an excerpt:
Today, we received a great follow-up question from a very sharp client in the fixed income space: “What is the data you’re looking at to support your view that GDP growth will slow down?”
As with any inflection-based call on growth and/or inflation, we start with the market’s risk management signals – which tend to lead the reported data. The USD is decidedly broken from a quantitative perspective and long-term interest rates are making lower-highs vs. the YTD peak in both growth data and #GrowthAccelerating expectations.
In short, this is how we have managed and communicated our non-consensus macro call over the last 3 months:
- #GrowthAccelerating was our view for most of 2013. The call was to be long pro-growth/consumption exposure.
- As we moved through Q4, we became increasingly cautious on the slope of growth….but, the price signal remained positive and we repeatedly highlighted that we knew we were “buying the bubble.”
- The price signal (10Y/VIX/$USD) started to break down from a quantitative perspective. So, we got decidedly less bullish on pro-growth leverage.
- The fundamental data began to come in increasingly negative, confirming the price breakdowns and we got longer of slow-growth/yield chasing assets (bonds/gold/commodities, etc)
Now here we are.