In this excerpt from The Macro Show this morning, Hedgeye analyst Josh Steiner discusses the reasons behind our decision to go from bullish to bearish on the U.S. housing market. He’s joined by U.S. Macro analyst Christian Drake.
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Takeaway: New Hampshire and Iowa are very different animals.
Below is a brief excerpt from Potomac Research Group Senior Analyst JT Taylor's Morning Bullets sent to institutional clients each morning.
"NEW HAMPSHIRE IS A VERY DIFFERENT ANIMAL, BUT SOME TAKEAWAYS FROM THE IOWA CAUCUS GIVE US CLUES FOR HOW THE NATION'S FIRST PRIMARY MAY PLAY OUT:
The Trump spectacle draws large crowds, but he was hurt by an inability to transfer that into committed voters. Cruz by contrast won "the Iowa way" with a new twist, marrying a heavy emphasis on door-to-door campaigning with cutting-edge digital targeting and demographic modeling. Evangelicals made up 64% of Iowa Republicans, and a large portion of the remaining voters classified themselves as very conservative. NH is one of the least religious states in the country and has a large block of libertarian and moderate voters. Fertile ground for Trump and Rubio -- or one of the governors. Not Cruz.
A Trump Ceiling?
Entrance and exit polls from Iowa indicated that higher turnout, especially among new voters, didn't translate into a big Trump boost -- it seems his presence in the race brought out an even share of fans and detractors. This may be indicative of a Trump ceiling among Republican primary voters -- a notion that would be cemented with a similar result in the Granite state. Trump needs a ground game to complement his message in order to win here and beyond.
Bush got burned. Badly
His campaign and Super PAC spent a combined $14.1 million in Iowa on ads alone -- that works out to more than $2,800 per vote for a dismal sixth-place finish. In NH, he'll be hard-pressed to convince voters that he's a better establishment standard-bearer than Rubio, who he just lost to by 20 points...
Sanders is in for the long haul
His campaign announced this week that it had pulled in $20 million in donations in January alone, averaging $27 apiece -- something he repeatedly highlighted in his not-quite-concession speech Monday night. Did we mention that he raised an additional $3 million after that speech? He's vowed to take the fight to Hillary "all the way to the convention."
Takeaway: Wait a second... Didn't the Fed hike interest rates?
A lot of people are scratching their heads wondering what the heck is going on with the 10-year Treasury. We're not. In case you missed it, the 10-year yield hit 1.83% earlier today. This ... after declining from 2.27% when the Fed hiked interest rates in December.
There's a simple explanation.
Here's analysis from Hedgeye CEO Keith McCullough in a note sent to subscribers earlier this morning:
"I don’t want you getting piggy with the 10yr UST at 1.83% - it’s been a great start to the year (long the Long Bond), so book some gains after this epic move towards the all-time lows (in yields) – “expensive” Long Bond gets more expensive as A) Deflation persists B) Growth Slows and C) German 10yr 0.29%, JGB 10yr 0.06%, and Swiss 10yr -0.33%."
Our Macro call on this has been spot on. That's why we've been bullish on Long Bonds since we added it to Investing Ideas in August of 2014. Here's how it's performed since then:
We're sticking with Long Bonds. It's been the best contrarian Macro call around especially based on where we think the U.S. economy is headed: #Recession.
Takeaway: Red remains the primary color in U.S. equity markets.
Here's a quick look at the year-to-date market scorecard for all the chest-pumping permabulls calling a bottom last week.
For the record, the only sector that we've liked all year on the equity side continues to work out:
Here's why, from a note Hedgeye CEO Keith McCullough sent to subscribers this morning:
"From a S&P Sector Style perspective, the Best Idea in our Q1 Macro Themes deck remains playing our rates call via long Utilities (XLU +0.4% yest to +6.4% YTD) and short Financials (XLF -2.8% yest to -11.8% YTD)"
More confirmation of our XLU long call today. In a tough tape for the equity markets today, it's the only sector (other than Materials) that's up. XLU is +1.2% versus S&P 500 down -1.2%.
Oh and did we mention that we're predicting a 20% or more stock market correction?
Stick with us. We're just getting started.
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