A Year Of Epic Face-Plants On Wall Street

A Year Of Epic Face-Plants On Wall Street - faceplant

 

Make no mistake. Wall Street had a terrible 2015. This year's consensus playbook was an absolute mess. 

 

A sampling of some recent headlines that caught our eye:

To be sure, the laundry list of Wall Street misses would be quite the Mea culpa. (But don't expect them to fess up.)

 

Let's take a quick run through some of this year's scorecard:

  • Year-end S&P targets have come up well short of consensus' 2208 figure.
  • Energy and financial stocks — supposed "must own" sectors — got train wrecked and are down 26%.
  • Stratospheric U.S. economic growth estimates of around 3%-plus have been consistently confounded by economic reality.
  • Meanwhile, Wall Street completely missed commodity-price deflation, (which has also run contrary to the Fed's prediction that it would all be "transitory"). The CRB index of commodities is down more than 20% this year.

No worries.

 

Hedgeye CEO Keith McCullough reviews the worst calls

  

For good measure, here's one last example of the old Wall Street swing-and-miss. Oil has tumbled another 42% year-to-date. And yet, most 2015 storytelling began with the idea that lower "prices at the pump" would be a shot in the arm for consumer spending. That didn't work out so well. Consumption is slowing. (See the slide below from our October Q3 Macro Themes presentation.) 

 

A Year Of Epic Face-Plants On Wall Street - consumption past peak

 

The list of Wall Street dogs goes on and on. We digress...

 

Luckily (for Hedgeye subscribers who stuck with our process) we tip-toed away from the consensus' face-plant and nailed investable ideas around #Deflation, #LateCycle / #GrowthSlowing and #LowerForLonger (rates). These are just a few of our non-consensus calls that proved correct, but confounded Wall Street throughout the year.

 

To be sure, our 30-some-odd analysts are also having a great year.

 

These are just a few of the many highlights.

 

Another prescient warning came from Hedgeye Senior Macro analyst Darius Dale back in late July, right before the death knell drop in the S&P 500. The S&P 500 had just made fresh all-time highs and, as Dale wrote, we were seeing a breakdown in a number of key market signals.

 

A Year Of Epic Face-Plants On Wall Street - darius dangers

 

That raised this simple question:

 

"... Sell everything? As predicted in our previous refresh, the recent bullish-to-bearish reversals in Emerging Market Equities, Foreign Exchange and Commodities were, in fact, a harbinger for similar breakdowns across the Domestic and International Equities asset classes. Our recent decision to add SPY to the short side of our thematic investment conclusions confirm how we are thinking about this risk in real time. At the bare minimum, it implies investors would do well to reduce their gross exposure and/or tighten up their net exposure to global asset markets."  

 

It was another big call Wall Street missed. The S&P fell off a cliff, dropping 12% before it bottomed in late August.   

 

Where do we go from here?

 

If you're sticking with the one Wall Street firm that nailed 2015, then watch next year. Our Macro team has been sounding the alarm on a coming recession that we think may take hold around the end of the first half of 2016. (Click here for our latest recap of the recessionary data stream.) 

 

A Year Of Epic Face-Plants On Wall Street - dale recession

 

You'd think that after such a bad year, Wall Street would shape up and ratchet back their rosy forecasts.

 

Nope...

 

So-called market prognosticators are back to predicting "Santa Claus rallies" and "Rip Your Face Off Rallies" into year end.

 

Anything to justify buying stocks yet again... 

 

Time will tell whether we're right about a coming U.S. recession. We're sure, however, that you won't hear anything nearly as bold out of Wall Street.   


Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more

Got Process? Zero Hedge Sells Fear, Not Truth

Fear sells. Always has. Look no further than Zero Hedge.

read more

REPLAY: Review of $EXAS Earnings Call (A Hedgeye Best Idea Long)

Our Healthcare Team made a monster call to be long EXAS - hear their updated thoughts.

read more

Capital Brief: 5 Things to Watch Right Now In Washington

Here's a quick look at some key issues investors should keep an eye on from Hedgeye's JT Taylor and our team of Washington Policy analysts in D.C.

read more

Premium insight

[UNLOCKED] Today's Daily Trading Ranges

“If I could only have one thing of the many things we have it would be my daily ranges." Hedgeye CEO Keith McCullough said recently.

read more

We'll Say It Again: Leave Your Politics Out of Your Portfolio

If your politics dictates your portfolio positioning, the Democrats and #NeverTrump crowd out there have had a hell of a week.

read more

Cartoon of the Day: 'Biggest Tax Cut Ever'

President Donald Trump's economic team unveiled what he called last week, "the biggest tax cut we’ve ever had.” Before you get too excited about that hang on a sec. "Trump Tax Reform ain’t gettin’ done anytime soon," Hedgeye CEO Keith McCullough wrote in today's Early Look.

read more