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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.