Counter-TREND Moves In Macro

Client Talking Points

EURO

Euro held the low-end of my $1.15-1.19 risk range, bounced, and his holding those gains at $1.16 this morning – anything Up Euro, Down Dollar gets you counter-TREND moves in commodities – how long they hold, we do not know.

COMMODITIES

The context of a counter-TREND bounce is critical – don’t forget that the CRB Index closed at multi-year lows on Tuesday at 219, then bounced +1% to 221 yesterday. Where #deflation gets priced next is highly dependent to the reaction to whatever Mario Draghi does – why doesn’t he just buy Oil futures?

KOSPI

In other global #GrowthSlowing news, Dr. KOSPI (and Copper) continue to signal ongoing slowing – next support for KOSPI is 1880. With Tech earnings weak (XLNX, FFIV, SNDK, etc.) overnight, it’ll be interesting to see how Tech (XLK -1.4% year-to-date) trades relative to the year-to-date laggard Financials (XLF, -5.2% year-to-date), post the AXP miss.

 

 

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Asset Allocation

CASH 57% US EQUITIES 5%
INTL EQUITIES 2% COMMODITIES 0%
FIXED INCOME 30% INTL CURRENCIES 6%

Top Long Ideas

Company Ticker Sector Duration
EDV

The Vanguard Extended Duration Treasury (EDV) is an extended duration ETF (20-30yr). As our declining rates thesis proved out and picked up steam over the course of the year, we see this trend continuing into Q1.  Short of a Fed rate hike, there’s no force out there with the oomph to reverse this trend, particularly with global growth decelerating and disinflationary trends pushing capital flows into the one remaining unbreakable piggy bank, which is the U.S. Treasury debt market.

TLT

As growth and inflation expectations continue to slow, stay with low-volatility Long Bonds (TLT). We believe the TLT has plenty of room to run. We strongly believe the dynamics in the currency market are likely contribute to a “reflexive deflationary spiral” whereby continued global macro asset price deflation and reported disinflation both contribute to rising investor demand for long-term Treasuries, at the margins.

HOLX

Hologic (HOLX) is a name our Healthcare Sector Head Tom Tobin has been closing monitoring for awhile. In what Tom calls his 3D TOMO Tracker Update (Institutional Research product) of U.S. facilities currently offering 3D Tomosynthesis, month-to-date December placements signaled a break-out quarter after a sharp acceleration in October and slight correction to a still very high rate in November. We believe we are seeing a sustained acceleration in placements that will likely drive upside to Breast Health throughout FY2015. Tom’s estimates are materially ahead of the Street, but importantly this upward trend in Breast Health should lead not only to earnings upside, but also multiple expansion and a significant move in the stock price.

Three for the Road

TWEET OF THE DAY

Best S&P Sector YTD? Utilities $XLU +4.2% YTD with growth slowing and bond yields falling

@KeithMcCullough

QUOTE OF THE DAY

Following the light of the sun, we left the Old World.

-Christopher Columbus

STAT OF THE DAY

Toyota Motor Corp. retained its crown as the world’s largest car company by sales in 2014, selling 10.23 million vehicles in 2014 up 3%. 


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