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Client Talking Points

EURO

The Euro is down -1% to $1.07 on neither inflation nor employment data doing anything month-over-month (the EUR/USD is down because markets expect ECB President Mario Draghi to deliver more cowbell in attempts to create inflation, which looks impossible right now). EU CPI went from -0.3% to -0.1%; unemployment rose from 11.2% to 11.3%...European stocks love Burning Euros.

OIL

Oil does not love Burning Euros because that equals #StrongDollar. Down -2.2% to -11% year-to-date for WTI Oil this morning after failing at all lines of @Hedgeye resistance – Energy and Financials (in equity land) remain our 2 favorite sector shorts/under-weights.

HOUSING

Our favorite sector long/over-weight remains U.S. Housing – for Pending Home Sales to be +3.1% with that weather was very bullish, because the housing data only gets more bullish with the Spring thaw. The ITB (Housing ETF) signaled overbought within a very bullish TREND yesterday (+9.1% vs SPX +1.3% year-to-date).

Asset Allocation

CASH 29% US EQUITIES 14%
INTL EQUITIES 13% COMMODITIES 0%
FIXED INCOME 27% INTL CURRENCIES 17%

Top Long Ideas

Company Ticker Sector Duration
MTW

Manitowoc  (MTW) is splitting the business into two companies. Given the valuation differential between the sum-of-the-parts and the current enterprise value of the company, the break-up should be a substantial positive. Recent nonresidential and nonbuilding construction data remains firm for 2015, which suggests that MTW’s crane sales should see a pickup in the first half of the year. The Architecture Billings Index (a survey of architects) typically leads nonresidential and residential construction spending by approximately 9-12 months. More importantly, the ABI Index leads MTW Crane Orders by 2 quarters.

ITB

iShares U.S. Home Construction ETF (ITB) is a great way to play our long housing call, U.S. #HousingAccelerating remains 1 of the Top 3 Global Macro Themes in the Hedgeye Institutional Themes deck right now. Builder Confidence retreated for a 3rd consecutive month in March and New Home Starts in February saw their biggest month-over-month decline since January 2007.  We think the underlying reality is more sanguine with the preponderance of the weakness in the reported February data largely attributable to weather.

 

While labor supply constraints may serve as a drag to builder confidence, presumably it is rising demand trends that are driving tighter conditions in the resi employment market.  All else equal, we’d view improving demand as a net positive.  On the New Construction side, while the sharp drop in Housing Starts captured most of the headlines, we believe the real story was in the 3% gain in permits. We'd expect to see a big rebound in the next two months in housing starts as the data plays catch-up to the thaw.

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. Most of the #Deflation trades bounced to something less-than-terrible (both absolute and relative) for 2015, whereas the real alpha trending in macro markets continues to play to the lower-rates-for-longer camp’s advantage.

Three for the Road

TWEET OF THE DAY

The Macro Show, Live and Interactive w/ @KeithMcCullough at 8:30AM ET today. Click here to watch for free: https://app.hedgeye.com/insights/43250-the-macro-show-live-with-keith-mccullough-at-8-30am-et

@Hedgeye

QUOTE OF THE DAY

It is good to have an end to journey toward; but it is the journey that matters, in the end.

-Ernest Hemingway

STAT OF THE DAY

The Pending Home Sales index rose +3.1% sequentially in February, taking the index to a new 19-month high.