CLIENT TALKING POINTS
RATES
The U.S. 10YR Yield is down -22 basis points in less than a week after the U.S. Dollar failed to reclaim TREND support. We’ve been looking for a dovish Fed since the March 18th meeting, so we’ll reiterate what they should do, given the slowing data – USD agrees – so if the Fed opts for one rate hike “just because its time” we think stock, bond, and commodity market risks ramp.
DAX
The German DAX continues to breakdown alongside a stabilizing Euro (Down Dollar = Up Euro); risk range there is finally tightening to $1.11-1.15 ahead of the Fed meeting. European stocks do not like a strong Euro and are still signaling bearish TREND across the board (ex-FTSE).
INDUSTRIALS
Terrible data, terrible day for the XLI (industrial stocks) – we shared the rate of change chart for Industrial Production in May (not affected by the “weather” excuse) – we don’t know how someone could signal bullish on cyclicals with Transports and Industrials looking like they do.
The Macro Show - CLICK HERE to watch a replay of today's show with guest analysis from Energy Sector Head Kevin Kaiser.
TOP LONG IDEAS
PENN
Penn National Gaming will likely tee off on the bears with a strong Q2, upward 2015/2016 EPS revisions, and the start of a 2 year growth period. PENN’s stock has climbed 27% this year on stabilizing regional gaming revenues, transaction-fueled optimism (real estate) surrounding the regional gaming companies and proximity to the opening of the new Plainridge racino on June 24. So what will drive even more upside? More and better. We think regional gaming trends are even better than anticipated by the Street and Q2 earnings should be a solid beat even before Plainridge contributes.
ITB
Housing outperformed in the latest week alongside choppy price action in equities and further, extraordinary volatility in sovereign bond markets. Fundamental data was light with weekly purchase applications data from the MBA the lone release of import for the industry. The first, high-frequency update on purchase demand in June, however, was positive. Purchase demand rose +9.7% sequentially, taking the index to its strongest level in 2 years at reading of 214.3. On a year-over-year basis, growth accelerated for a 4th consecutive week to +14.6%. Inclusive of last weeks gain, demand in 2Q is tracking +14.3% QoQ and +13.4% YoY.
TLT
The market has been jockeying for positioning in front of next week’s policy statement from Janet Yellen. We believe Yellen signaling that she remains “data dependent” (i.e. repeats what she said at the March 18thmeeting) is the most probable outcome. To be clear, we remain the long-bond bulls (TLT, EDV, MUB). With that being said we aren’t claiming to be able to predict the outcome of next week’s meeting (sure we do have biases). What we do know is that Hedgeye estimates for growth and inflation shake out much lower against both consensus and central bank forecasts for the full year 2015 (remember that this is after their forecasts have already been downwardly revised).
Asset Allocation
| CASH | 46% | US EQUITIES | 4% | |
| INTL EQUITIES | 10% | COMMODITIES | 12% | |
| FIXED INCOME | 26% | INTL CURRENCIES | 2% |
THREE FOR THE ROAD
TWEET OF THE DAY
ASIA (ex-Shanghai): in the last mth, Hang Seng -6.4%, Singapore -4.8%, KOSPI -3.7%
#GrowthSlowing @HedgeyeDDale
@KeithMcCullough
QUOTE OF THE DAY
Create your future from your future, not your past.
Werner Erhard
STAT OF THE DAY
The Chicago Blackhawks won the Stanley Cup for the 3rd in 6 seasons with a 2-0 victory against the Tampa Bay Lightning in Game 6 of the Final last night.
