USD, Oil and UST 10YR

Client Talking Points

USD

A big 6-day move gave chart-chasers another round of whiplash, and now the bounce (in Euros +0.4%) vs USD. We think another round of Down Dollar can continue into this bomb of a GDP report on Friday (which the government is working on re-calibrating the calculation!).

OIL

WTI oil was up +1.4% on the USD arresting its ascent – get the Dollar right and you’ll get most things Commodities right. The CRB Index tested the low-end of our 221-227 risk range yesterday and bounced too. WTI oil has immediate-term upside to $61.34. 

UST 10YR

We’re not sure how many more times perma Bond Bears can ring the ‘end of the world’ sirens, but that was a stiff 20 basis points drop from yet another lower-high for the 10YR Yield in early May – post yesterday’s -2.3% year-over-year Durable Good print,  we’re staying with the #LateCycle slowing call.

Asset Allocation

CASH 48% US EQUITIES 4%
INTL EQUITIES 10% COMMODITIES 12%
FIXED INCOME 24% 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). Unless the Fed wants to show the world it has the power to go both ways on rates, we don’t think the Fed will ever be able to justify hiking interest rates. We expect an unarguable slowing of the current economic cycle by Q4 of this year. If you think domestic economic growth is slow now, just wait until the U.S. economy faces very difficult growth and inflation comps in the second half of 2015.

ITB

Housing got its mojo back in May, rebounding strongly over the last couple of weeks alongside the moderation in rates and ongoing strength in reported price/volume data. Below is a round-up of the data thus far in 2Q:

  • Housing Starts:  New 7-year high in the latest month
  • Purchase Applications (existing market):  2Q15 Tracking +14% QoQ and +13% YoY, on pace for best quarter in two years.
  • Pending Home Sales (existing market):  PHS are up an average of +11.8% year-over-year the last two months
  • New Home Sales (new market):  NHS are up an average of +22.5% year-over-year the last two months
  • HPI:  After a year of discrete deceleration in home price growth in 2014, 2nd derivative HPI has seen 3 consecutive months of acceleration through the latest March data.
TLT

The strength of the labor market continues to be a good indicator of our positioning in the current cycle:

  • Seasonally adjusted jobless claims came in at 274k last week vs. 270K est.
  • Despite the slight miss, the rolling 4-week SA figure dropped to 266.3k (lowest rolling SA figure since the week ending April 15th, 2000, which also came in at 266.3k) We all know what happened afterwards…..

Three for the Road

TWEET OF THE DAY

Finland's unemployment rate rises to 9.6% from 9.4%

@KeithMcCullough

QUOTE OF THE DAY

Today is only one day in all the days that will ever be. But what will happen in all the other days that ever come can depend on what you do today.

Ernest Hemingway 

STAT OF THE DAY

According to according to WPP and Millward Brown's annual "Brand Z" rankings Marlboro is the world’s 10th most valuable brand, commanding 43.8% of the U.S. cigarette market.