We think you deserve the truth.
Yesterday, the divide between truth and economic storytelling stretched to the point of ridiculousness. Between the Fed, Old Wall and the mainstream media we just don't know what to say anymore.
Forget this troika of economic storytellers. Here's the reality that the market told us yesterday as summarized by Hedgeye CEO Keith McCullough in a note to subscribers earlier this morning:
"Wait ... I thought they 'raised rates' yesterday? This is what I mean by the market read-through being dovish on growth – UST 10yr down -7bps this morning, Yield Spread (10s minus 2s) testing YTD low at +123bps, and Utilities (XLU) led the relief rally +2.5% on the day!"
The fact that #LowerForLonger rate proxies rallied yesterday — i.e. XLU and Housing stocks (ITB) — while credit did nothing and commodities continued to crash — see Oil and Dr. Copper below — confirms what we've long argued about growth, namely the Fed just hiked into an industrial and corporate profit slowdown.
Yellen & Co. continues to assert that these #LateCycle indicators are "transitory." While crashing industrial production or sustained deflation may appear "transitory" to the academic central planners in Washington, other Americans would likely disagree.
Talk to the 10,000 workers at Caterpiller (CAT) who are projected to lose their jobs in the coming year. Or ask a cattle rancher — beef cattle prices are off more than 25% this year — whether these factors feel "transitory" or not. We are confident that you'll hear a much different story.
Clearly, we disagree with the Fed. We think there's a more apt term for the recent spate of data that's been rolling over since the beginning of the year. It's cyclical. This data is undoubtedly cyclical and falling off its peak.
Of course, time will tell but we're sticking with our original conviction perhaps best articulated by Hedgeye Senior Macro analyst Darius Dale during our coverage of the Fed yesterday:
“This is the most obvious slow-moving economic train wreck that we’ve ever seen.”
And that's not transitory...
To hear more economic truths (with tons of analysis) from McCullough and Dale on the Fed's economic storytelling, click here to watch a replay of our post-FOMC coverage yesterday.