See all that red in U.S. equity markets this morning?
Investors had a tough pill to swallow with the release of today's Chicago PMI numbers which fell off a cliff.
All year long, Wall Street strategists have been calling a bottom in PMIs. It never came. That was supposedly the bullish case for buying equities.
Ahem.
"I’m sure they’ll say it’s different this time (or something like that) but for those of you data dependent fans, I’ve attached the historical data series on this index reading," Hedgeye CEO Keith McCullough wrote in a note to subscribers. "Some false positive readings vis-à-vis recession signaling but pretty strong track record."
In a series of research notes in late October, when Wall Street was ramping up its PMI story, Hedgeye Senior Macro analyst Darius Dale responded to Wall Street bulls who questioned our economic modeling. Here's an excerpt from a telling note back a follow-up note in November:
"... That PMI readings continue to slow on a trending basis across both the domestic manufacturing and services sectors should lend a significant degree of pause to any bullish narrative surrounding domestic economic growth. We continue be among the most accurate firms (if not the most accurate) on the Street with respect to forecasting both trends and inflections in U.S. and global GDP growth and our forecasts for both remain well below consensus with respect to the intermediate-term."
(Here's another link to an unlocked research note on global PMI numbers, "Global Growth Has Not "Bottomed." To read more of our institutional research, ping sales@hedgeye.com)
Hedgeye CEO Keith McCullough offered more analysis in a Real-Time Alerts note sent to subscribers this morning telling them to cover some of their UUP (bullish U.S. dollar) exposure:
"As opposed to being long the fictional storytelling of the Old Wall's Santa Rally ("buy stocks for a December rally"), being long the Long Bond (TLT) and US Dollar (UUP) are green today as the SP500 drops towards down -1.5% for December.
Why? This morning's PMI print of 42.9 DEC vs. 48.7 NOV was a certified train wreck.
Some of these #recessionary economic reports aren't even in the area code of consensus at this point. That means at least a few "blue chip" economists have to change their forecasts for Q4 inasmuch as the Atlanta Fed has...
Keep your core position in USD, but sell some on overbought days so that you can buy some back on oversold ones."
There you have it. The data (and reality) will set you free.
