The Macro Show Replay | March 18, 2016

CLICK HERE to access the associated slides.

An audio-only replay is available here. 


Cartoon of the Day: Cuckoo Markets

Cartoon of the Day: Cuckoo Markets - Dovish Fed cartoon 03.17.2016


Markets remain at the mercy of a mercurial Fed.

INSIGHT | Another Trump Victory (And Why California Could Decide GOP Nomination)

Takeaway: What to watch on the election 2016 campaign trail.

Below is a brief excerpt from Potomac Research Group Chief Political Strategist JT Taylor's Morning Bullets sent to institutional clients each morning.



INSIGHT | Another Trump Victory (And Why California Could Decide GOP Nomination) - trumplican


In an impeccably timed announcement ensuring any fallout was overshadowed by the SCOTUS press conference, Trump declared that he is going to speak at the AIPAC conference instead of appearing at the now-canceled Fox debate on Monday. This is another victory for Trump -- it denies his rivals and the media a chance to gang up on him and exploit his vulnerabilities -- while flexing new muscle as the frontrunner. At this point, the only thing that seems to have a chance of derailing Donald Trump is...Donald Trump. 



INSIGHT | Another Trump Victory (And Why California Could Decide GOP Nomination) - cruz picture


After crunching the Republican delegate numbers, we think the race may very well come down to CA. If Trump wins the Golden State, we think he will likely exceed the magic number of delegates he needs for the nomination. There has been scant polling in CA to date, but what we've seen shows a narrow Trump lead, with Cruz breathing down his neck. CA often votes too late to be a determining factor in the nomination, and as a solid blue state rarely receives presidential election love -- however, this year it is in a position to be a determining factor in whether there will be a contested Republican convention.



For months, the Democratic Senate Campaign Committee (DSCC) has been preparing for a Republican ticket with Trump or Ted Cruz on top. With Trump as the presumptive nominee, they're now putting their playbook in motion, tying vulnerable Republican Senators up for re-election to Trump's controversial policies and personality. Some strategists are predicting up to an eight percent drop across the polls for Republican Senators in the general election if Trump is on the ballot. Looking to capitalize on the 13 Senators who pledged to back the eventual nominee, the DSCC has dubbed them "reTRUMPlicans," faithful only to the "Party of Trump."

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Q: Is This A Generational Buying Opportunity In Emerging Markets?

Takeaway: Emerging Market stocks are down -19% since we turned bearish. We still don't like them.

Q: Is This A Generational Buying Opportunity In Emerging Markets? - brazil

A: No.


With Emerging Markets (EEM) down -19% since we turned bearish in April 2013, Hedgeye Senior Macro Darius Dale presented a 105-page slide deck to institutional subscribers this week to update his thinking. (To read Dale's entire slide deck or additional Macro research ping


The takeaway?


"We see further downside at the primary asset class level, as well as elevated risk of material bankruptcy cycles in a number of key emerging market economies," Dales writes. 


Here are a couple key charts from the presentation (click images below to enlarge):


Our proprietary emerging market "Crisis Risk Index."

Q: Is This A Generational Buying Opportunity In Emerging Markets? - dale crisis index


... Our Crisis Risk Index versus Equity Market Performance.

Q: Is This A Generational Buying Opportunity In Emerging Markets? - dale bubbles



Initial Claims | Steady

Takeaway: This morning's initial jobless claims report showed no trend change from what we've been seeing YTD on the labor front.

Initial Claims | Steady - Hawkish cartoon 03.14.2016



In short, this morning's claims number appears consistent with YTD trends. In other words, the US Labor market has remained resilient in spite of myriad other signs of slowing. As labor has historically been coincident/lagging we continue to expect to see weakness in the non-services side of the economy bleed through to the economy at large. To date, however, we continue to wait, as we view the setup as still asymmetrically negative.


On the energy side of the house, conditions remain challenging as the basket of 8 energy states we track show an ongoing decoupling from the broader US.



Initial Claims | Steady - Claims12


Initial Claims | Steady - Claims13


Initial Claims | Steady - Claims14

The Data

Prior to revision, initial jobless claims rose 6k to 265k from 259k WoW, as the prior week's number was revised down by -1k to 258k.


The headline (unrevised) number shows claims were higher by 7k WoW. Meanwhile, the 4-week rolling average of seasonally-adjusted claims rose 0.75k WoW to 268k.


The 4-week rolling average of NSA claims, another way of evaluating the data, was -11.9% lower YoY, which is a sequential improvement versus the previous week's YoY change of -11.4%


Initial Claims | Steady - Claims2


Initial Claims | Steady - Claims3


Initial Claims | Steady - Claims4


Initial Claims | Steady - Claims5


Initial Claims | Steady - Claims6


Initial Claims | Steady - Claims7


Initial Claims | Steady - Claims8


Initial Claims | Steady - Claims9


Initial Claims | Steady - Claims10


Initial Claims | Steady - Claims11


Initial Claims | Steady - Claims19

Yield Spreads

The 2-10 spread rose 6 basis points WoW to 105 bps. 1Q16TD, the 2-10 spread is averaging 109 bps, which is lower by -27 bps relative to 4Q15.


Initial Claims | Steady - Claims15


Initial Claims | Steady - Claims16



Joshua Steiner, CFA


Jonathan Casteleyn, CFA, CMT


Q: Where Did The Fed Easing Go?

Q: Where Did The Fed Easing Go? - vlad


A: Straight to Russia!




Yes, Russia. Here's Hedgeye CEO Keith McCullough in a note sent to subscribers earlier this morning:


"Forget being long Oil’s chart for this last gusher towards $40 – the real juice in being long a Fed Easing (Dollar Down, Reflation Up) is going straight to the Putin vein and buying the Russian Trading System Index, +4.7% this am and +19% in the last month! This should all end well."


Central planners may not be able to save the world. But they can definitely put some rubles in Putin's pocket.


Q: Where Did The Fed Easing Go? - Putin 09.03.2014

Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.45%
  • SHORT SIGNALS 78.38%