CLIENT TALKING POINTS
USD
Dollar Up, Reflation Down – it’s not that complicated to understand unless you are the Fed, trying to maintain “credibility” going for another policy mistake, raising rates into a slow-down. We’ll see if they’re S&P 500 (instead of data) dependent, the 15-day correlation (machines chase it) between USD and SPX is -0.84.
COMMODITIES
Dollar Up, Commodities Down – short-term inverse correlation there is even higher than with the S&P 500 at -0.96 for the CRB Index (19 commodities), so the CRB dropped -2.2% yesterday, back to -1.7% year-to-date (the new up).
RUSSELL 2000
We are The Bears on U.S. stocks and we can’t understand how the Russell dropping a full -1.9% yesterday back to -5.3% year-to-date (and -17% since July) is bullish; apparently if no one talks about it and quotes SPX, everything is fine.
*Tune into The Macro Show with Hedgeye CEO Keith McCullough live in the studio at 9:00AM ET - CLICK HERE.
TOP LONG IDEAS
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.
Asset Allocation
| CASH | 69% | US EQUITIES | 0% | |
| INTL EQUITIES | 0% | COMMODITIES | 5% | |
| FIXED INCOME | 21% | INTL CURRENCIES | 5% |
THREE FOR THE ROAD
TWEET OF THE DAY
QUICK TAKE: How To Risk Manage Gold | $GLD https://app.hedgeye.com/insights/49900-quick-take-how-to-risk-manage-gold-gld… via @hedgeye
@KeithMcCullough
QUOTE OF THE DAY
QUICK TAKE: How To Risk Manage Gold | $GLD https://app.hedgeye.com/insights/49900-quick-take-how-to-risk-manage-gold-gld… via @hedgeye
@KeithMcCullough
STAT OF THE DAY
Data obtained from Reuters shows that more than 2 million Brazilians are set to lose unemployment benefits by June.