CLICK HERE to access the associated slides.
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.
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.
ALL ROADS LEAD TO... CALIFORNIA?
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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Takeaway: Emerging Market stocks are down -19% since we turned bearish. We still don't like them.
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 email@example.com.)
"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."
... Our Crisis Risk Index versus Equity Market Performance.
Takeaway: This morning's initial jobless claims report showed no trend change from what we've been seeing YTD on the labor front.
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.
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%
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.
Joshua Steiner, CFA
Jonathan Casteleyn, CFA, CMT
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.
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