THE HEDGEYE MACRO PLAYBOOK

Takeaway: In today's edition of the Macro Playbook, we circle the wagons on the domestic economy just the way you like it – in chart form.

THEMATIC INVESTMENT CONCLUSIONS

Long Ideas/Overweight Recommendations

  1. Health Care Select Sector SPDR Fund (XLV)
  2. iShares National AMT-Free Muni Bond ETF (MUB)
  3. Vanguard Extended Duration Treasury ETF (EDV)
  4. iShares 20+ Year Treasury Bond ETF (TLT)
  5. Consumer Staples Select Sector SPDR Fund (XLP)

Short Ideas/Underweight Recommendations

  1. iShares Russell 2000 ETF (IWM)
  2. SPDR S&P Regional Banking ETF (KRE)
  3. iShares MSCI European Monetary Union ETF (EZU)
  4. iShares MSCI France ETF (EWQ)
  5. SPDR S&P Oil & Gas Exploration & Production ETF (XOP)

 

QUANT SIGNALS & RESEARCH CONTEXT

Quick Check-In With the U.S. Economy: It’s been a few weeks since we circled the wagons on the state of the domestic economy so we thought we’d bequeath to you today’s visual summary – presented without spin or further commentary, effectively allowing you be the judge of the state of the U.S. economy (let us know what you think; as always, we’d love to hear your thoughts!).

 

Markit Composite PMI: slowing on both a sequential and trending basis (CLICK HERE to learn why the trend in this data series is a very important economic indicator):

 

THE HEDGEYE MACRO PLAYBOOK - COMPOSITE PMI

 

Markit Services PMI: slowing on both a sequential and trending basis:

 

THE HEDGEYE MACRO PLAYBOOK - SERVICES PMI

 

Markit Manufacturing PMI: slowing on both a sequential and trending basis:

 

THE HEDGEYE MACRO PLAYBOOK - MANUFACTURING PMI

 

Industrial Production: accelerating on a both a sequential and trending basis:

 

THE HEDGEYE MACRO PLAYBOOK - INDUSTRIAL PRODUCTION

 

Real PCE: accelerating on a both a sequential and trending basis:

 

THE HEDGEYE MACRO PLAYBOOK - REAL PCE

 

Nominal Retail Sales: accelerating on a both a sequential and trending basis:

 

THE HEDGEYE MACRO PLAYBOOK - RETAIL SALES

 

Conference Board Consumer Confidence: slowing on a sequential and ever-so-slightly on a trending basis:

 

THE HEDGEYE MACRO PLAYBOOK - CONSUMER CONFIDENCE

 

NFIB Small Business Confidence: accelerating on a both a sequential and trending basis:

 

THE HEDGEYE MACRO PLAYBOOK - BUSINESS CONFIDENCE

 

Exports: slowing on both a sequential and trending basis:

 

THE HEDGEYE MACRO PLAYBOOK - EXPORTS

 

Imports: accelerating on a sequential basis and slowing on a trending basis:

 

THE HEDGEYE MACRO PLAYBOOK - IMPORTS

 

Nonfarm Payrolls: accelerating on a both a sequential and trending basis:

 

THE HEDGEYE MACRO PLAYBOOK - PAYROLLS

 

Jobless Claims (4-week rolling average, NSA, YoY): slowing on both a sequential and trending basis:

 

THE HEDGEYE MACRO PLAYBOOK - JOBLESS CLAIMS

 

U-6 Underemployment Rate: slowing on both a sequential and trending basis:

 

THE HEDGEYE MACRO PLAYBOOK - U 6 UNEMPLOYMENT

 

Real Wages: accelerating on a both a sequential and trending basis:

 

THE HEDGEYE MACRO PLAYBOOK - REAL WAGES

 

Durable Goods New Orders: slowing on both a sequential and trending basis:

 

THE HEDGEYE MACRO PLAYBOOK - DURABLE GOODS

 

Headline CPI: slowing on both a sequential and trending basis:

 

THE HEDGEYE MACRO PLAYBOOK - CPI

 

Core CPI: slowing on both a sequential and trending basis:

 

THE HEDGEYE MACRO PLAYBOOK - CORE CPI

 

Merry Christmas, Happy Hanukkah and Joyful Kwanzaa to all!

 

***CLICK HERE to download the full TACRM presentation.***

 

TRACKING OUR ACTIVE MACRO THEMES

#Quad4 (introduced 10/2/14): Our models are forecasting a continued slowing in the pace of domestic economic growth, as well as a further deceleration in inflation here in Q4. The confluence of these two events is likely to perpetuate a rise in volatility across asset classes as broad-based expectations for a robust economic recovery and tighter monetary policy are met with bearish data that is counter to the consensus narrative.

 

Does Your View on Rates Include the Risk of a “Reflexive Deflationary Spiral”? (12/19)

 

#EuropeSlowing (introduced 10/2/14): Is ECB President Mario Draghi Europe's savior? Despite his ability to wield a QE fire hose, our view is that inflation via currency debasement does not produce sustainable economic growth. We believe select member states will struggle to implement appropriate structural reforms and fiscal management to induce real growth.

 

Moscow, We Have a Problem (12/16)

 

#Bubbles (introduced 10/2/14): The current economic cycle is cresting and the confluence of policy-induced yield-chasing and late-cycle speculation is inflating spread risk across asset classes. The clock is ticking on the value proposition of the latest policy to inflate as the prices many investors are paying for financial assets is significantly higher than the value they are receiving in return.

 

#Bubbles: “Hedge Fund Hotel” Edition (Part II) (12/8)

 

Best of luck out there,

 

DD

 

Darius Dale

Associate: Macro Team

 

About the Hedgeye Macro Playbook

The Hedgeye Macro Playbook aspires to present investors with the robust quantitative signals, well-researched investment themes and actionable ETF recommendations required to dynamically allocate assets and front-run regime changes across global financial markets. The securities highlighted above represent our top ten investment recommendations based on our active macro themes, which themselves stem from our proprietary four-quadrant Growth/Inflation/Policy (GIP) framework. The securities are ranked according to our calculus of the immediate-term risk/reward of going long or short at the prior closing price, which itself is based on our proprietary analysis of price, volume and volatility trends. Effectively, it is a dynamic ranking of the order in which we’d buy or sell the securities today – keeping in mind that we have equal conviction in each security from an intermediate-term absolute return perspective.


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