Back To Reality: A Short-Lived Bounce, BOJ Nonsense & Our Top Macro Ideas

Takeaway: Last Friday’s month-end markup and Japanese central-market-planning was day-trading fun. Back to reality.

Back To Reality: A Short-Lived Bounce, BOJ Nonsense & Our Top Macro Ideas  - ball drop cartoon 12.31.2015

"After the best month in Hedgeye history, we're off to a nice start in February."

-Hedgeye CEO Keith McCullough this morning

Most Wall Street firms can't say they called the bubble high in U.S. stocks back in July. Nor can they say that they started sounding the alarm bells *again* after the modest rebound from August lows.

We can.

Despite last week's month-end "rally," stocks have been hammered. The S&P 500 was down -5.1% in January ... the worst start to the year since 2009. We've been outspokenly bearish. We haven't changed our views. And we continue to see about 10% downside.

Dissecting last week's rally, a short-sighted Wall Street cheered the Bank of Japan's announcement it would pursue a "negative interest rate policy." Okay. Here's analysis from McCullough in a note to subscribers this morning:

"... The Yen smashed on the “negative yield” panic by the Japanese on Friday. Good for a 2-day Nikkei lift to lower-highs, but what's next with the Nikkei -7% YTD? All Japanese, European, and Chinese FX panic means is more #Deflation, in Dollars."

The BOJ's manic policy decision is rippling through global bond markets...

Back To Reality: A Short-Lived Bounce, BOJ Nonsense & Our Top Macro Ideas  - bond yields

"... Ten-year yields around the world crushed by Japan doing more of what hasn’t worked for decades – JGB 10yr = 0.04%! German 10yr = 0.31%, Swiss 10yr -0.31% – US Long Bond (TLT) remains our favorite Macro long idea alongside USD and Utilities (XLU)."

 

Q: How do you play Wall Street's end-of-month exuberance?

A: Fade the storytelling.

This remains the winning risk management strategy.

Back To Reality: A Short-Lived Bounce, BOJ Nonsense & Our Top Macro Ideas  - spy rta

Cheers!