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Client Talking Points

YEN

Yet another down day for the Japanese Yen to new year-to-date lows and the Nikkei ramp on that remains epic – Japanese stocks are up for the 10th day in a row (that hasn’t happened in 27 years) to +18.7% year-to-date vs SPX +3.1%.

YIELDS

Global Bond Yields have returned to the long-term bond investor TREND of falling as Global Growth Expectations slow. The Swiss 10YR is down -2 basis points back to -0.06% and the German 10YR is down -3 basis points to 0.53%. We suggest you stay with those Long Bonds in the U.S. at 2.14%. 

CHINA

What’s a -6.5% down day at the Shanghai Composite Casino amongst friends? The Chinese will definitely need another round of rumoring tonight – that’s all there is to do as China’s population gets older at its fastest rate, ever #GrowthSlowing.

Asset Allocation

CASH 46% US EQUITIES 5%
INTL EQUITIES 10% COMMODITIES 13%
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

GOLD: immediate-term upside in my risk range to $1209/oz

@KeithMcCullough

QUOTE OF THE DAY

If you cannot do great things, do small things in a great way.

Napoleon Hill 

STAT OF THE DAY

2 billion videos are watched daily on Snapchat by 13 to 34 year olds (according to Snapchat).

 

The Macro Show - CLICK HERE to watch today's edition at 8:30am ET.