Client Talking Points
The key to our quantitative signal is price/volume/volatility, so we’ll be watching those volatility components (both Equities and OVX) very closely this morning. Front month VIX would need to break-down below 15.52 to turn the bearish SPX/Russell tide.
With the CRB Index closing at 162 yesterday (Oil sub $30, Copper $1.94, Nickel -5.7% on the day!, etc) macro markets are bouncing on those crashes bouncing, not Chinese trade data (Shanghai was -2.4%). #Deflation/Recession reports pending on Friday with USA’s PPI and Industrial Production reports.
Not much of a bounce in UST 10YR Yield terms this morning, the UST 10YR is at 2.14% with immediate-term downside to 2.06% this week if we continue to be right on that #Deflation data. We looking for the JPM report tomorrow to be bearish on the margin too.
*Tune into The Macro Show with Hedgeye CEO Keith McCullough live in the studio at 9:00AM ET - CLICK HERE.
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Top Long Ideas
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.
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.
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
Keith McCullough @KeithMcCullough 1h1 hour ago
VIDEO (3mins) Why Hedgeye Acquired Potomac Research https://www.youtube.com/watch?v=-kYtVLJc_y0 via @YouTube #SOTU
QUOTE OF THE DAY
The surest way not to fail is to determine to succeed.
Richard Brinsley Sheridan
STAT OF THE DAY
Christmas sales in the UK "disappointing", growing just 1% in December, after a 0.7% increase in November.