Client Talking Points
The USD had its 3-day down move post the USA Q4 GDP slowing/miss (then ISM miss), and finally signaled immediate-term TRADE oversold into yesterday’s close as the EUR/USD tapped the top-end of our $1.11-1.14 risk range (and failed there) – you can simplify a lot of what happened out there in the last 3 trading days with a counter-TREND move in Down Dollar.
The CRB Index (19 Commodities) went from multi-year lows of 213 on Thursday’s close to bottoming on the U.S. GDP print Friday morning, then ramping +6.6% in a straight line from there. Unless you think the USD keeps falling (and Euro breaks out from $1.14), you sell CRB and Oil, and you buy Gold.
On big U.S. equity beta chases in 2015, our favorite sector to lie out on the short side when we’re at the top-end of the risk range remains the Financials (XLF). That’s mainly because we think long-term rates continue to make lower-lows. On a bad jobs print Friday, we can get you UST 10YR Yield of 1.61%, in a hurry.
|FIXED INCOME||31%||INTL CURRENCIES||8%|
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
$ZMH unit pricing getting worse in the US, and that negative price trend following Medicare spending trend
QUOTE OF THE DAY
The color of springtime is in the flowers; the color of winter is in the imagination.
STAT OF THE DAY
The median income for men with college degrees in Silicon Valley is 61% higher than the median income for college-educated women, a gap of $34,233. The comparable gender wage gap for the country as a whole is 48%.