CLIENT TALKING POINTS
USD
The USD is hitting 2 month lows on the combination of what are now consensus expectations for an easier Fed and a big bounce in Greece (stocks v-bottomed off bombed out lows in Athens on the “no exit” headlines); if the Fed isn’t dovish enough today, the USD can easily bounce off this oversold signal.
UST 10YR
It is hard to discern whether bonds are front-running a “not dovish enough” Fed, but the levels really matter here as we’ve seen plenty of bounces to lower-highs in rates for the last 16 months. Our immediate-term risk range for the UST 10YR is 1.85-2.02 and that’s as wide as the range has been in 2 months.
ASIA
Asia experienced one of the weaker sessions in a while with Indonesia down another -2.5% (down -7.1% in 3 days), Australia -1.8%, and India continuing to break down (BSE Sensex is now bearish TREND signal) – Thailand unexpectedly cut rates and stocks dropped -0.8% there too.
TOP LONG IDEAS
MTW
The Dodge Construction Starts Index accelerated at its highest rate since 1982. The index was driven largely by non-building projects, which was 74% higher for the first three months compared to last year. The Architecture Billings Index (ABI), a survey of architects, increased ~3% month-over-month and ~5% year-over-year for March. The ABI Index typically leads nonresidential and residential construction spending by 9-12 months. More importantly, the ABI Index leads Manitowoc Crane Orders by 2 quarters. This suggests MTW’s crane sales should see a pickup in the first half of the year. MTW reports April 29th after the close. Earnings Call will be held at 10:00am eastern time the following day.
ITB
iShares U.S. Home Construction ETF (ITB) is a great way to play our long housing call. Housing went 4 for 4 in a data heavy calendar for the sector this week with demand improving across both the new and existing markets and the fledgling acceleration in price growth finding some positive confirmation. The builder stocks had a choppy week of performance as investors held mixed opinions of earnings reports and management commentary out of DHI and PHM but, from a fundamental data perspective, the Trend remains one of discrete improvement.
TLT
Ten-year rates dipped 12bps on the week (forward-looking growth expectations) and the USD got crushed for a 1.5% loss. Growth and inflation expectations get priced in AHEAD of the more dovish policy tone resulting from any sign of deterioration in the labor market. Wednesday’s Fed meeting will be the next catalyst that will steer the market’s expectation on forward-looking growth and inflation. We expect the dots (forward-looking federal fund rate expectations) to be pushed out….again.
Asset Allocation
| CASH | 40% | US EQUITIES | 12% | |
| INTL EQUITIES | 14% | COMMODITIES | 0% | |
| FIXED INCOME | 30% | INTL CURRENCIES | 4% |
THREE FOR THE ROAD
TWEET OF THE DAY
*THIS MORNING* The Macro Show, Live with @KeithMcCullough + special guest at 8:30AM ET https://app.hedgeye.com/insights/43771-the-macro-show-live-with-keith-mccullough-at-8-30am-et … via @hedgeye
@Hedgeye
QUOTE OF THE DAY
If you are not willing to risk the usual you will have to settle for the ordinary.
Jim Rohn
STAT OF THE DAY
U.S. Purchase Applications were 0% week-over-week, up +20.8% year-over-year.
