Equities and Bond Yields

Client Talking Points

JAPAN

Bank of Japan (BOJ) Governor Kuroda was up all night talking and talking about his central planning and while he didn’t do anything, JGBs (10yr) did – they are down 5 basis points to -0.39% (their biggest move higher in a month); the Yen is down -0.4% vs USD. And the Nikkei likes this, up +0.8% to +13.9% year-to-date (of the majors, Nikkei looks better than both the DAX and S&P 500 right now).

10YR UST

Global Yields are down -3-5 basis points this morning; the UST 10YR is -4 basis points at 2.19% (which is right around where it started the year – fun trip); immediate-term risk range is still very wide at 1.95-2.31%; that’s a leading indicator for more bond market volatility. 

S&P 500

All-time closing high of 2121 yesterday for the S&P 500 and while we certainly didn’t call for that, that doesn’t mean we don’t think you keep selling  on green ahead of what we’re expecting to be a volatile/illiquid summer; especially bearish on Consumer stocks – U.S. Retail (XRT) -0.7% on the up day as the consumption data rolls over from #LateCycle highs.

Asset Allocation

CASH 58% US EQUITIES 2%
INTL EQUITIES 5% COMMODITIES 5%
FIXED INCOME 27% INTL CURRENCIES 3%

Top Long Ideas

Company Ticker Sector Duration
VNQ

All-time closing high of 2121 yesterday for the S&P 500 and while we certainly didn’t call for that, that doesn’t mean we don’t think you keep selling  on green ahead of what we’re expecting to be a volatile/illiquid summer; especially bearish on Consumer stocks – U.S. Retail (XRT) -0.7% on the up day as the consumption data rolls over from #LateCycle highs.

ITB

iShares U.S. Home Construction ETF (ITB) is a great way to play our long housing call. It was a relatively light data week for housing with weekly mortgage application data and the March employment report offering incremental updates on the current state of housing demand.  On the market side, interest rate volatility remained a concern for the public homebuilders but one we believe remains shorter-term in nature absent another expedited, step function increase in interest rates. We think the rate related pressure will be largely transient unless we see a further back-up in mortgage rates on the order of +50-100bps from here – a potentiality we would not view as probable at this point. On the fundamental side, the drumbeat of improvement remains ongoing.

TLT

The U.S. dollar has gone on a big reversal since the Fed’s March 18th meeting. Since the meeting, the dollar has moved lower and rates higher. This short-term move in rates has caused confusion with respect to our lower for longer call. Put simply, we have been wrong on the direction of our four macro tickers in the newsletter. A continuation of this trend will force us to re-evaluate the longer term call.

 

Three for the Road

TWEET OF THE DAY

Japanese Gov Bond Yields (10yr) have their biggest pullback day of the month -5bps = 0.39%

@KeithMcCullough

QUOTE OF THE DAY

Man is not the creature of circumstances. Circumstances are the creatures of man.

Benjamin Disraeli

STAT OF THE DAY

A report released today by the Bureau of Justice Statistics (BJS) shows there were 15.1 police officers per 10,000 U.S. residents in 2013 which is down from 15.4 police officers per 10,000 residents in 2007.  



Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more

Got Process? Zero Hedge Sells Fear, Not Truth

Fear sells. Always has. Look no further than Zero Hedge.

read more

REPLAY: Review of $EXAS Earnings Call (A Hedgeye Best Idea Long)

Our Healthcare Team made a monster call to be long EXAS - hear their updated thoughts.

read more

Capital Brief: 5 Things to Watch Right Now In Washington

Here's a quick look at some key issues investors should keep an eye on from Hedgeye's JT Taylor and our team of Washington Policy analysts in D.C.

read more

Premium insight

[UNLOCKED] Today's Daily Trading Ranges

“If I could only have one thing of the many things we have it would be my daily ranges." Hedgeye CEO Keith McCullough said recently.

read more

We'll Say It Again: Leave Your Politics Out of Your Portfolio

If your politics dictates your portfolio positioning, the Democrats and #NeverTrump crowd out there have had a hell of a week.

read more