Editor’s Note: This is an edited amalgamation of tweets from Hedgeye CEO Keith McCullough’s Twitter feed yesterday. The 10-Year U.S. Treasury yield has dropped 14 basis points from 2.36% to 2.22% since.
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Now that Fixed Income volatility has gone into phase transition mode, Equities look ripe to be next. In #timestamped terms (Real-Time Alerts), we'd be short the Russell (IWM) after being bullish on it in Q1 I'd also be net short US Equities for the first time for real in 2015. Timing matters.
On Bond Yields, this is the second day of loud and large scale sentiment capitulation. We were right on long-duration bonds for 16 months, then wrong for a month...But the truth is that you could have said I was wrong on long-term bond yields at every lower-high since Jan 2014 too.
This is a very interesting position to re-load and/or establish new positions in bonds - especially for those who missed the whole ride. If your outlook is for more Global #GrowthSlowing, there are very few ways to express that bullishly other than through lower-yields. That is, of course, unless "this time is different" and bonds go down as growth is slowing. Otherwise, the Bears on bonds have to hope to get lucky and see a sentiment (charts) reversal in bonds.
For the record, if the big bang theory on bonds is in motion, everything and anything you own is dead. And I wouldn't rule that out - that's why I like the Russell (IWM) short better than selling my long-term TLT idea. Incidentally, as you know, earnings are #LateCycle. Perma bulls learned this lesson the hard way buying the 2007 peak. (see chart below):
Looking for SPX to test 2002-2013 zone at some pt this summer time, regardless - better way to be short than making up bond stories like some. Don’t forget, I was bullish on US equity beta into the last Fed meeting.
Now I don't have a catalyst so its bear time.