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Editor's Note: Below is a brief excerpt and chart from today's Early Look written by Hedgeye Macro analyst Ben Ryan. Click here to subscribe.

"... Even the firm with the non-consensus 18-month deflation view, wrestles with the location of a bottom. The truth is that in addition to quantitative behavioral factors that have been good indicators, the fundamental supply-demand picture will probably play a role. A supply-side backstop is proving to be an elusive, slippery floor in commodity-intensive cyclicals because the floor itself deflates with deflation (chart of the day at the bottom):

  • PPI Industrial Chemicals peaked on a Y/Y NSA rate of change basis in September 2014 and has been negative since September 2013
  • PPI Iron and Steel peaked on a Y/Y NSA rate of change basis in October 2014
  • PPI Commodities Construction & Machinery has been declining on a Y/Y NSA rate of change basis since June 2014, and it’s been tracking negative since October 2013
  • PPI Mfg. tires has been tracking negative on that same Y/Y NSA % change basis since October 2012" 

CHART OF THE DAY: When Will Deflation Bottom? - El Chart 12.10.15