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Client Talking Points

UST 10YR

The UST 10YR Yield getting smoked after Janet Yellen puffs the dovish peace pipe, keeping the “patient” word in and acknowledging what she cannot reverse (#Deflation in all reported inflation metrics); 1.96% this morning is -14 basis points lower than 24 hours ago with slowing CPI and GDP reports (Thursday and Friday) up next.

USD

The USD evidently did not like the dovishness either, but the selloff here is modest compared to bond yields. The USD is only -0.2% vs. Burning Euros and Yens, so that should put a short-term bottom in for Oil, Gold, etc. … and that helps keep the S&P 500 at all-time highs (both rate sensitive and inflation expectation stocks stop going down).

#HOUSING

#Housing is one of our Top 3 Themes in our Global Macro Themes deck, it hit higher-highs yesterday post the Toll Brothers (TOL) quarter/commentary. The ITB (sector ETF)is up +8.9% year-to-date and remains one of our favorite allocations in U.S. Equities, alongside Healthcare (XLV) and Consumer Discretionary (XLY) which are +5.9% and +5.0% year-to-date, respectively (SPX +2.7%).

Asset Allocation

CASH 40% US EQUITIES 9%
INTL EQUITIES 8% COMMODITIES 0%
FIXED INCOME 31% INTL CURRENCIES 12%

Top Long Ideas

Company Ticker Sector Duration
EDV

#Housing is one of our Top 3 Themes in our Global Macro Themes deck, it hit higher-highs yesterday post the Toll Brothers (TOL) quarter/commentary. The ITB (sector ETF)is up +8.9% year-to-date and remains one of our favorite allocations in U.S. Equities, alongside Healthcare (XLV) and Consumer Discretionary (XLY) which are +5.9% and +5.0% year-to-date, respectively (SPX +2.7%).

TLT

Low-volatility Long Bonds (TLT) have plenty of room to run. Late-Cycle Economic Indicators are still deteriorating on a TRENDING Basis (Manufacturing, CapEX, inflation) while consumption driven numbers have improved. Inflation readings for January are #SLOWING. We saw deceleration in CPI year-over-year at +0.8% vs. +1.3% prior and month-over-month at -0.4% vs. -0.3% prior. Growth is still #SLOWING with Real GDP growth decelerating at -20 basis points to +2.5% year-over-year for Q4 2014.The GDP deflator decelerated -40 basis points to +1.2% year-over-year.

HOLX

Hologic (HOLX), at this stage in their product cycle and in the current stage of the economic cycle, has some very impactful tailwinds emerging to their revenue growth and the implied growth in the future. A stock generally will perform really well when doubt about future growth turns to optimism while the most recent data confirms the optimism. So far, we have a little bit of both; recent positive data like the December 2014 quarter upside and consensus estimates and ratings starting to move off of multi-year lows. A less-worse trend in Pap testing and rising patient volume can combine to get us close to flat for HOX’s Cytology (Pap) business. As the growth in Cytology improves and is less of a drag, the 3D Mammography growth can flow through. We think the outlook is bright, and with a few more data points, we think a lot more investors will agree with us.

Three for the Road

TWEET OF THE DAY

@KeithMcCullough and I will be streaming the @Hedgeye Morning Macro Call LIVE this morning at 8:30am ET: https://app.hedgeye.com/insights/42542-hedgeye-morning-macro-call-live-with-keith-mccullough

@HedgeyeDDale

QUOTE OF THE DAY

The lion does not turn around when a small dog barks.

-African Proverb

STAT OF THE DAY

Purchase Applications are up +4.6% week-over-week and +9.8% year-over-year, this is the fastest rate of growth since June 2013. Tracking +2.8% year-over-year, +7% quarter-over-quarter.