CLIENT TALKING POINTS
GERMANY
The German 10YR Bund crashes to a record low of 0.29% which is just jamming people into chasing German stocks, which are now up a big league +14.5% year-to-date (vs. boring SPX return of +2.6% year-to-date) – Italian stock market +15.8% year-to-date! #centralplanning.
UST 10YR
The UST 10YR is down -17 basis points for the week-to-date ahead of slowing U.S. CPI and GDP reports (today and tomorrow) – you’d buy the Long Bond on those fundamental factors alone, never mind a +162 basis points spread over 10YR Bunds.
USD
The USD continues to weaken (post Janet Yellen’s dovishness, and ahead of the economic data – remember the CPI deflating will spin the Fed’s rhetoric) – we think it’s just another counter-TREND move, but short-term bullish for Oil, Gold, etc.
TOP LONG IDEAS
EDV
You want to own the Vanguard Extended Duration Treasury (EDV) in this current yield-chasing, growth slowing environment. The trend in domestic growth continues to signal growth slowing, and the counter-TREND moves we’ve seen over the last few weeks (@Hedgeye TREND is our view on a 3-Month or more duration) remain something to fade until we can see more follow-through that growth is trending more positively (second-derivative positive).
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.
Asset Allocation
| CASH | 42% | US EQUITIES | 9% | |
| INTL EQUITIES | 8% | COMMODITIES | 0% | |
| FIXED INCOME | 31% | INTL CURRENCIES | 10% |
THREE FOR THE ROAD
TWEET OF THE DAY
Tune Into Hedgeye's Morning Macro Call 2/26 LIVE at 8:30AM ET https://app.hedgeye.com/insights/42585-hedgeye-s-morning-macro-call-2-26-live-at-8-30am-et
@KeithMcCullough
QUOTE OF THE DAY
Live in the sunshine, swim the sea, drink the wild air.
-Ralph Waldo Emerson
STAT OF THE DAY
The Japanese Nikkei rips +1.1% to a new 15 year high of +7.7% year-to-date (vs the SPX +2.6% year-to-date).
