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Client Talking Points

EUROPE

European equities are mostly flattish to up small across the board. The two outliers are Greece up about 1% and Russia up about 1.3%. Volume in European equities is pretty quiet, at about 2/3 of the one month average. The Euro continues to be in free fall, pushing the low end of our risk range, down about 45 basis points. Our immediate term risk range for the Euro is 1.05-1.08.

GERMANY

Germany is one equity market we want to highlight, it continues to be in a bullish formation and we remain long term bulls. Exports account for 47% of German GDP, so weak EUR policy is a huge TAILWIND for Germany. German fundamentals are outperforming peers and showing positive lift (business & economic confidence; IP, factory orders).

CHINA

The Shanghai Composite Index is up about 2.7%, it is reportedly up on speculation of increased stimulus. The World Bank effectively came out and said that China will have to do some stimulus to sustain its growth rate. March trade data was kind of disappointing across the board, exports down about 15% year-over-year from 48.3%. March trade balance was $3.08B from $60.62B, this is the narrowest balance since FEB 2014.

Asset Allocation

CASH 32% US EQUITIES 12%
INTL EQUITIES 15% COMMODITIES 0%
FIXED INCOME 31% INTL CURRENCIES 10%

Top Long Ideas

Company Ticker Sector Duration
MTW

Manitowoc  (MTW) is splitting the business into two companies. While the crane business receives the most attention in part due to its cyclicality and because they are well, more noticeable, Manitowoc’s other business, Foodservice equipment, is the larger of the two in terms of operating income (60% vs. 40% for Cranes). Several indicators are pointing towards upward momentum for MTW’s Foodservice business. Restaurant same store sales have benefitted since the drop in oil prices. Furthermore, an indicator by the National Restaurant Association, RPI Capital Expenditures Index, has surged recently in part due to lower fuel prices driving restaurant traffic and restaurant owners’ outlook.

ITB

iShares U.S. Home Construction ETF (ITB) is a great way to play our long housing call. The housing data was again strong with Pending Home Sales, HPI and Purchase Demand all accelerating to close out March. Pending Home Sales rose +3.1% sequentially in February with signed contract activity up a remarkable +12% YoY, taking the index to a new 19-month high. Mortgage Purchase Applications – the most real-time, high frequency housing demand indicator - rose +5.7% WoW on the back of last week’s +4.9% advance and accelerated to +7.6% on a year-over-year basis. HPI: The Case-Shiller 20-city series showed home prices grew +4.6% year-over-year in January.  A stabilization/inflection in home price growth is important as housing related equity performance tracks the slope of home price growth strongly.

 

TLT

It was another week of declining long-term yields getting you paid on the long-side of Low-volatility Long Bonds (TLT). To reiterate our view over the longer-term, we pin a good chance the U.S. Dollar will reach new highs ($120 anyone?) with the probably of long-term Treasury yields reaching all-time lows very much in play.

Three for the Road

TWEET OF THE DAY

Real Conversations: Roach on Global Imbalances, Risks and How It... https://www.youtube.com/watch?v=JqCyo_0yxz8 via @YouTube

@KeithMcCullough

QUOTE OF THE DAY

Work hard in your silence. Let your success be your noise.

Frank Ocean

STAT OF THE DAY

92.1% of software developers are men.