Dollar Down, Rates Down, Commodities Up

Client Talking Points

UST 10YR

UST 10YR Yield is straight back down to where it started 2015 (2.17%) after every Bond Bear cried wolf again on the moving monkey “breakout” in bond yields – this has been going on for 17 months now and it’s for one very basic reason = Wall Street’s growth expectations remain too high, especially on #LateCycle factors like employment, wages, and capex.

GOLD

If you want to find the love we had for Gold in 2010-2011, you want to find Waldo on U.S. growth expectations pushing the Fed out to 2016 and beyond on “rate hikes” – Gold loves nothing more than the Big Mac Combo of Down Dollar, Down Rates – you have both this morning, and a nice +0.7% move for Gold with no resistance to $1240. 

CHINA

If you’re as bearish on Global Growth as we are, you probably own a ton of Chinese Equity exposure – if you only buy stocks when the growth data gets really bad, China is the poster child for that. The Shanghai Composite Casino ramps another +2.8% overnight to +44.2% year-to-date, crushing Macau gaming revenues as margin brokers rock the timestamps.

Asset Allocation

CASH 48% US EQUITIES 4%
INTL EQUITIES 8% COMMODITIES 12%
FIXED INCOME 26% INTL CURRENCIES 2%

Top Long Ideas

Company Ticker Sector Duration
VNQ

One way to invest in Lower-For-Longer, from an equity perspective, is being long U.S. REITS (VNQ). The reality is that we are in a #LateCycle slowdown and the jockeying around each incremental data point will continue to get more and more intense as the Fed’s only ammo for suspending the cycle that has unfolded many times over is to push out the dots on a rate hike. #LowerForLonger.

ITB

The ITB turned in modest positive absolute and relative performance in the latest week as the advance in interest rates ebbed and the high frequency mortgage purchase application data continued to reflect improving housing demand trends. This is a data heavy week for housing. NAHB Builder Confidence dropped for the 4th time in 5 months, dipping -2pts sequentially in May to an Index reading of 54.   Confidence currently sits +9 pts higher than May of last year and is basically right on the average reading of 55 observed over the last three expansionary periods.  Further, at  the current reading of 54, the index remains well above the Better-Worse Mendoza line of 50, signaling builders continue to view conditions favorably.

TLT

The counter-TREND moves in the USD and commodities have been extensive and now confirmed: 1) U.S. Dollar: Down another 1.20% week-over-week to complete its BULLISH to BEARISH TREND Reversal. The dollar is now BULLISH on a TAIL duration (three years or less) and BEARISH on a TREND duration (3-Months or more) 2) CRB Index: +2.0% week-over-week and +5.5% 1-Month Change. The CRB is now BULLISH on a TREND duration and BEARISH on a TAIL duration.

Three for the Road

TWEET OF THE DAY

Is the Government Lying To You? I Weigh In on The Macro Show https://app.hedgeye.com/insights/44235-is-the-government-lying-about-the-economy-mccullough-weighs-in-on-the… via @hedgeye

@KeithMcCullough

 

QUOTE OF THE DAY

With freedom, books, flowers, and the moon, who could not be happy?

Oscar Wilde

STAT OF THE DAY

The returns of the S&P 500 from peak cycle (April 15th, 2000) to the 2002 cycle low was -43% (moving from 1,356.56 to 776.76).


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