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Client Talking Points

UK

The UK election was a blowout verse mainstream expectations, British Prime Minister David Cameron and his Conservative Party have claimed an outright majority in Parliament, with 330 seats out of 650, and can form a new government. It was the biggest day for the UK FTSE 100 Index on a relative basis to other European stock markets of the year. There was a huge move in the British Pound over a percent this morning as well.

CHINA

You simply can't ignore what is going on in China. The PBOC came out and effectively said they were not going to do a massive QE. Export growth was down -6% year-over-year and imports were down -16%. China's economy is slowing at an accelerating rate, Chinese brokers are trying to create rumors about stimulus and the central bank is saying don't expect QE...all this was met by a rally in the stock market.

JOBS REPORT

Total NFP was basically inline with estimates, seeing an improvement sequentially. This is not much of a surprise since last month was the lowest number we have seen since December 2013. The jobs report showed a creation of 223,000 jobs and an unemployment rate of 5.4 percent. CLICK HERE to watch the special jobs report edition of The Macro Show.

Asset Allocation

CASH 60% US EQUITIES 4%
INTL EQUITIES 5% COMMODITIES 0%
FIXED INCOME 29% INTL CURRENCIES 2%

Top Long Ideas

Company Ticker Sector Duration
RH

We think people are missing the magnitude of earnings growth at Restoration Hardware (RH), the sustainability of that trajectory over a long period of time, and ultimately the degree to which that will accrue to equity holders. The question is not whether the stock will go to $110 vs $120 (where we see most price targets), but whether it will get to $200 vs $300. We think the catalyst calendar looks healthy starting with the 1Q15 print set to be release in early June. Following that, RH is set to pick up the cadence of its store opening, with 4 new stores set to be open in the back half of the year. This remains our favorite name in retail.  

ITB

iShares U.S. Home Construction ETF (ITB) is a great way to play our long housing call. Builder performance was choppy in the latest week alongside beta volatility and investor attempts to square the net impact to housing from rising rates and ongoing improvement in housing fundamentals. As it stands currently, rates remain a tailwind to affordability relative to last year and would require a significant, expedited increase to have a material negative impact on housing activity in the immediate/intermediate term. Elsewhere across Housing Macro, the fundamental data continued to roll in strong.

TLT

Insomuch as the April Jobs Report may prove to be a bearish catalyst for Treasury bonds, slowing growth data over the next two quarters should prove decidedly bullish. Fighting buy-side consensus on the long side of Treasury bonds been a great call thus far so we’d be booking gains and taking down our gross exposure to this asset class on the next immediate-term pop. Ultimately, we think our #LowerForLonger theme prevails, but volatility is likely to pick up in the interim.

Three for the Road

TWEET OF THE DAY

If you want the truth about the jobs numbers, start with sources who actually model them

@KeithMcCullough

QUOTE OF THE DAY

When he worked, he really worked. But when he played, he really PLAYED.

Dr. Seuss

STAT OF THE DAY

The average American consumes 48 pints of ice cream each year.