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Client Talking Points

FED

Federal Reserve Bank of Chicago President Charles Evans said yesterday that economic fundamentals are “really quite good.” We aren’t sure if he said this immediately after existing home sales was reported being down -7% month-over-month or what he was precisely talking about. People who have no idea what is going on are preparing to do something that they already did that didn’t work…RAISING RATES. What has led the market higher is USD dollar down and reflation, so what happens in April if the Fed raises rates or indicates that they will raise in June? That will be a destabilizer in markets.

USD

The USD is up for the 3rd consecutive day in a row - the dollar signaled oversold last week, gold signaled overbought, they have roughly 96% correlation inversely. And now we are in this position where the Fed could easily jam the USD up another 3%. The immediate-term risk range for USD is 94.59-96.69.

GOLD

Gold is up ~19% for the year, the USD going up and interest rates going up could cause gold to fall. Around 1,225 is an interesting spot to buy more gold but we are going to be a little more patient in the face of all the rate rise commentary. The immediate-term risk range for gold is 1225-1279.

 

*Watch the replay of The Macro Show with Keith McCullough and Darius Dale - CLICK HERE

Asset Allocation

CASH 65% US EQUITIES 0%
INTL EQUITIES 0% COMMODITIES 5%
FIXED INCOME 24% INTL CURRENCIES 6%

Top Long Ideas

Company Ticker Sector Duration
XLU

Utilities (XLU) hasn’t bounced as much as leveraged , high-beta resource names, but the outperformance is greatly divergent vs. both the market, and our preferred sector short in financials (XLU +12.3% YTD, S&P -0.3% YTD, XLF -4.6% YTD).

GIS

General Mills (GIS) remains one of analyst Howard Penney's top Long ideas in the Consumer Staples space. As we have continued to say, it boasts style factors ideal during turbulent times; high market cap, low beta and liquidity. Case in point, GIS is up 7% year-to-date, versus essentially flat for the S&P 500 in 2016. We'll have an update next week after GIS reports earnings.

TLT

Long-Term Treasuries (TLT) finished +1.9% on the week. Aside from Mr. Market, the Fed downwardly revised expectations (the common lag) on Wednesday:

  • The median 2016 GDP forecast revised to +2.2% vs. +2.4% in December
  • The median 2016 PCE Inflation forecast revised to +1.2% vs. +1.6% in December
  • Median Federal Funds end-2016 rate forecast revised to 0.9% vs. +1.4% in December

From a GROWTH, INFLATION, POLICY perspective, it’s lower for longer on growth and inflation and a more dovish Fed.

Three for the Road

TWEET OF THE DAY

I can no longer summarize the problems this Co. has in 140 characters $CMG #ShortStoryChallenge no more 

@HedgeyeHWP

QUOTE OF THE DAY

You yourself, as much as anybody in the entire universe, deserve your love and affection.

Buddha

STAT OF THE DAY

CEA issued report in February 2015 claiming that broker-sold mutual funds (infected by “conflicted advice”) under-performed other funds by at least 100 basis points, $17 billion in extra costs for mutual funds alone.