“Bounces” within Crashes

Client Talking Points

RUSSELL 2000

The Russell 2000 took a peak at crash mode intraday yesterday (down more than 20% from its July 2015 bubble high) and is currently down -19.6% from that 1295 closing price. This is not China – this is a U.S. domestic liquidity trap strangled by USA #Slowing.

NIKKEI

The Nikkei is playing catchup, dropping another -2.7%. The Nikkei has had no up days in 2016, yet – so probably get one tomorrow as the Nikkei is signaling immediate-term TRADE oversold at -17.4% from its 2015 peak. The Yen signaling overbought vs. USD too.

SPAIN

Studying the complexion of the manic media’s “bounces” is #critical. The IBEX is up +1.2% on the bounce, but sis till in crash mode, down -24.3% from its 2015 high. The DAX is up +2.3% on the bounce, but down -18.8% from its April 2015 closing high.

 

*Tune into The Macro Show with Macro Analyst Ben Ryan at 9:00AM ET - CLICK HERE

Asset Allocation

CASH 67% US EQUITIES 3%
INTL EQUITIES 0% COMMODITIES 0%
FIXED INCOME 18% INTL CURRENCIES 12%

Top Long Ideas

Company Ticker Sector Duration
MCD

McDonald's boasts style factors that are best in class for turbulent times in the market, big cap and low beta and it has handily been outperforming the market and its competitors as of late. One of the biggest aspects of competing in their space is value offering.

 

McDonald’s has ceded share in the value category primarily to Burger King over the last two years. Now that they are launching a national value platform with a full slate of media support, MCD will recover the value customer.

GIS

General Mills' business seems to be starting to pick up steam, as the company is working to improve merchandising and advertising on core business.

 

In addition they have executed a few small, but meaningful M&A deals showcasing the change in managements thinking. The divestiture of Green Giant to B&G Foods, for instance, although a profitable business, was a good move for them given their lack of focus/investment in the brand (they have more opportunities like this throughout their portfolio, in addition to SKU rationalization).

 

GIS continues to look for more sizeable acquisitions in emerging markets, but the string of pearls approach may remain most effective domestically.

TLT

After the worst start to a year literally EVER for U.S. equity markets, TLT caught a bid in the first week of trading as the centrally-planned Chinese stock markets traded limit down earlier in the week. It was the largest central bank liquidity injection from Beijing since Chinese markets crashed in September.

 

TLT remains one of our strongest long idea calls heading into 2016 as junk bond markets begin to crack.  

Three for the Road

TWEET OF THE DAY

Chairman Jeff SMITH Sells 1,300,000 of DARDEN $DRI..  Well played and great trade!

@HedgeyeHWP

QUOTE OF THE DAY

Success is no accident.

Pele                         

STAT OF THE DAY

The Financial Times reports that reselling sneakers is now a $1 billion market. 


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