Client Talking Points
$1.12! vs USD this morning. And European equities absolutely love it – taking everything from Belgian to French stocks to +7-8% year-to-date in Burning Euro terms. For now, that crushes year-to-date returns in U.S. equities (SPX =0.2%, Russell -1.2% year-to-date).
But don’t confuse Draghi’s move with results where it matters; inflation expectations are falling faster now (Down Euro = Up Dollar à #Deflation Risk) with the CRB Index dropping -1.3% yesterday to multi-year lows. Copper is getting smoked to -10.2% year-to-date this morning, and Oil signaling a lower-low of support down at $44.82.
Short-term U.S. Equity beta chasing just knocks front-month volatility to higher-lows within a bullish intermediate-term TREND. Refreshed risk range for VIX = 16.05-23.05, so they can move this market as fast to the downside as they did to the upside. Be nimble and trade this macro market. Panic central planning perpetuates volatility.
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Top Long Ideas
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.
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.
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
Yield Spread (leading indicator for rate of change in US growth) compresses 6bps vs yesterday - short $KRE on that
QUOTE OF THE DAY
Giving should be entered into in just the same way as investing. Giving is investing.
-John D. Rockefeller
STAT OF THE DAY
A WBUR poll showed that 75% of Boston residents want a public referendum on whether the city should host the Olympic Games.