CLIENT TALKING POINTS
EURO
In rate of change terms, at 1.88% year-over-year that was the slowest NFP print since the cycle peaked in Q1, but the Fed is going to hike on that. That’s why we signaled buy USD on last week’s Euro ramp of +2.7%. The Euro is back down -0.6% this morning to $1.08 and has no immediate-term support to $1.05; the data doesn’t matter to the Fed – the S&P 500 does.
OIL
#StrongDollar (rate hike catalyst DEC 16th) driven #Deflation Risk definitely matters to most asset classes – after a -3.8% decline last week, Oil is down another -1.1% this morning to $39.53 and the Commodities complex remains in crash mode.
EM
Japanese Equities +1% on the Dollar Up move overnight – EM Asia continued lower (no likey Up Dollar); Thailand -0.7% (-6.4% in the last month is one of the ugliest); EM (MSCI Index) deflated another -0.9% last week to -14.3% year-to-date.
*Tune into The Macro Show with Hedgeye CEO Keith McCullough in the studio at 9:00AM ET - CLICK HERE.
TOP LONG IDEAS
MCD
Restaurants Sector Head Howard Penney had no material update on McDonald's (MCD) this week. However, here is what Penney wrote around when we added MCD to Investing Ideas. It's worth reiterating our high conviction in the stock:
"We continue to get more bullish every time we talk to the company, franchisees and/or customers which we have polled via conducting surveys. We are going to be looking at a much different company 1-3 years from now."
"Urgency has been instilled from the top down by new CEO Steve Easterbrook," according to Penney. "This ship is in gear and headed north. 2015 will be the last time this stock is below $100."
RH
A lot has happened in 13 weeks... not the least of which is that Restoration Hardware (RH) is underperforming not only the market by 16%, but Retail as well (by 7%) – despite RH being more insulated from some of the issues that are clipping earnings today for retailers more broadly.
Over this time period, however, RH meaningfully accelerated square footage growth, launched two new concepts. Some say it’s bad timing. We disagree. RH is our favorite name in the retail space, and we like it across all three durations. Trade, Trend, and Tail.
TLT
On went the game of slowing last week with a little central planning un-secretive sauce. Despite the ECB’s move to cut the deposit rate to -0.30%, Draghi didn’t ring the cowbell loud enough. Meanwhile, Friday’s jobs report might have been just enough for Janet to hike rates into a late cycle slowdown. The consensus long USD crowd was crushed on the ECB news. The dollar lost over 2% on Thursday and rates were pushed higher.
If growth is going to continue to slow, with a rate hike on the horizon, a relative fixed income spread play (long TLT, short JNK) is exactly what you want on.
Asset Allocation
| CASH | 66% | US EQUITIES | 3% | |
| INTL EQUITIES | 7% | COMMODITIES | 0% | |
| FIXED INCOME | 14% | INTL CURRENCIES | 10% |
THREE FOR THE ROAD
TWEET OF THE DAY
The Best of The Macro Show This Week https://app.hedgeye.com/insights/47911-risk-manage-the-process-the-best-of-the-macro-show-this-week… via @hedgeye
@KeithMcCullough
QUOTE OF THE DAY
Obvious thinking commonly leads to wrong judgments and wrong conclusions.
Humphrey B. Neil
STAT OF THE DAY
Only 5% of Twitter users have more than 100 followers.
