Client Talking Points
Slower-for-longer, reiterated across Asia and Europe overnight with Japan’s PMI slowing to 51.0; China 49.8; Spain 51.7 (vs. 53.2 last month); Italy 52.8 (vs. 53.8 last month); France and Germany = 50.6 & 52.3 – all better than the U.S. (Chicago) PMI plunge to a recessionary 48.7 (vs. 54.4 last)!
The Russell 2000 bounced yesterday, but is still down -15.1% from its #Bubble peak and very much signaling that a crash type draw-down (greater than 20%) is in play like you’ve seen from Hong Kong to Germany. This reiterates that you need to get liquid on rallies, avoiding small cap/high beta.
UST 10YR Yield was actually down on the day yesterday and down again this morning to 2.05%. We’re one more slowing U.S. jobs report away from a 1-handle; risk range on the 10YR continues to signal lower-highs (2.14% resistance) with all-time lows in play.
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Top Long Ideas
McDonald’s clearly continues to be well-liked by our Restaurants research team and is a near perfect fit into our macro team’s current "style factor" preferences. This stock is high cap with a low-beta, coupled with a company turnaround story that is currently well underway. We believe this stock will do well through this tumultuous time in the market.
As previously mentioned, the company has all day breakfast starting on October 6. We anticipate this development as not only driving increased visits from existing customers, but also new customers that maybe don’t wake up early enough to get breakfast by 10:30am (or simply just people that enjoy eating breakfast items outside of the morning!)
As Sector Head Todd Jordan notes, "PENN should benefit from the release of state gaming figures over the next few weeks. Recall that August was weaker than many thought. While we predicted this particular slowdown, our model is showing a sharp September rebound.
September revenues should rebound and serve as a catalyst for the stock going into Q3 earnings. On the research side we have not altered our views of PENN’s long term growth story. We continue to see more upside from current price levels.
Is the U.S. economy still showing signs of a cyclical slowdown? Yes. If you, like us, remain skeptical on the said policy path from our omnipotent central planners, and you believe growth continues to slow, then we respectfully submit that you sit on your GLD and TLT allocations.
3 GDP comps are difficult. And, once the data comes out, we think expectations will be downwardly revised again. In other words, wait for yet another Fed punt on a 2015 hike.
Three for the Road
TWEET OF THE DAY
NEW VIDEO | Eye on The #Election Vol. 1: Fondness Fading for #Trump and #Hillary https://app.hedgeye.com/insights/46627-eye-on-the-election-vol-1-fondness-fading-for-trump-and-hillary… via @HedgeyeDJ cc @KeithMcCullough
QUOTE OF THE DAY
One important key to success is self-confidence. An important key to self-confidence is preparation.
STAT OF THE DAY
Apple announced that it sold a record 13 million iPhone 6s and 6s Plus handsets over launch weekend, breaking last year’s record of 10 million.
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