Takeaway: “Mister Wabbit, before you die, you can have one wast wish.” - Elmer Fudd
Headline Retail sales grew +0.1% sequentially while the Control Group measure (GDP input) declined -0.1% sequentially with electronics spending and the e-sales and dining-out proxies each decelerating on a MoM, YoY and 2Y basis.
The positive revision to the march data will help drag 1Q GDP back to positive territory but the early read through for reported 2Q growth is less sanguine – particularly in the context of consensus estimates which have increased ~20% over the last month to +3.3%.
Meanwhile, sales-to-Inventory ratio’s continue to peak despite the spread between nominal spending and nominal earnings growth re-expanding in recent months.
With wage growth running sub-2% and savings rates at a cycle low (& the very low end of the historical range) the upside to consumption growth over the immediate/intermediate term remains very much constrained, in our view.
In short, with the ~24% of the domestic economy that is retail sales off to an inauspicious start, consumption has some significant hay to bale in order to best rising consensus growth expectations and re-capture last year’s slope of growth.
With the dollar and 10Y broken and food/energy/housing inflation taking down a greater share of wallet, we're not convinced that consumption acceleration materializes.
Christian B. Drake
Takeaway: Last chance to buy what’s been working all year? Slow-growth-yield-chasing is where the performance is at.
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This indispensable trading tool is based on a risk management signaling process Hedgeye CEO Keith McCullough developed during his years as a hedge fund manager and continues to refine. Nearly every trading day, you’ll receive Keith’s latest signals - buy, sell, short or cover.
In this excerpt from our daily macro call for institutional investors, Hedgeye CEO Keith McCullough and senior macro analyst Darius Dale talk inflation and why the Fed just has it wrong.
Takeaway: The weather turned, but the consumption data that matters most didn’t.
POSITION: 8 LONGS, 7 SHORTS
But whatever you do, don’t call falling bond yields (do not sell bonds here!) on today’s #ConsumerSlowing (Retail Sales +0.1%) print a US growth slowing confirmation. The weather turned, but the consumption data that matters most didn’t.
Across our core risk management durations, here are the lines that matter to me most:
- Immediate-term TRADE overbought = 1901
- Immediate-term TRADE support = 1866
- Intermediate-term TREND support = 1845
In other words, you have -1.8% and -2.9% immediate (TRADE) and intermediate-term (TREND) risk to the downside if you get plugged chasing the all-time SPY high here. So don’t do that.
Both the Russell2000 and UST 10yr yields remain bearish, because growth is slowing.
Keith R. McCullough
Chief Executive Officer
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