CLIENT TALKING POINTS
EURO
There was a big multi-standard deviation move in the EUR/USD straight up to $1.12 now; from $1.05 (our initial 2015 target) that’s one heck of a bounce – European stocks did not enjoy that. We highly doubt ECB President Mario Draghi is going to sit on his hands, especially with plenty of European economic data losing rate of change gains.
10YR YIELDS
There was a big multi-standard deviation move in German Bund Yields (they doubled off the all-time lows!) definitely had its impact on the rates market – so now, like in FX, risk ranges for sovereign rates (our leading indicator for volatility) are widening – there should be plenty of chop to risk manage from here.
RUSSELL 2000
Inasmuch as European stocks don’t like Up Euro, U.S. Growth Investors (especially the domestic consumer) don’t like Down Dollar, because that equals rising gas prices – this is the 1st immediate-term TRADE breakdown signal in the Russell of 2015 – we wouldn’t buy the dip either.
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 | 10% | |
| INTL EQUITIES | 12% | COMMODITIES | 2% | |
| FIXED INCOME | 30% | INTL CURRENCIES | 6% |
THREE FOR THE ROAD
TWEET OF THE DAY
MUST SEE TV 9AM ET Hedgeye CEO @KeithMcCullough + @MariaBartiromo go deep on markets, #Fed, #economy etc @FoxBusiness
@Hedgeye
QUOTE OF THE DAY
I am not on this earth by chance. I am here for a purpose and that purpose is to grow into a mountain, not shrink to a grain of sand.
-Og Mandino
STAT OF THE DAY
Restaurants are being charged $5,100 to broadcast the Mayweather-Pacquiao boxing match, Buffalo Wild Wings executives said during its earnings call Tuesday.
