Below are a number of important callouts this morning to help investors risk manage these manic macro markets.
Top of the list? The U.S. Dollar.
Here's analysis via Hedgeye CEO Keith McCullough in a note sent to subscribers earlier this morning:
"After falling another -0.4% last week to YTD lows of -4.5%, the US Dollar Index is signaling immediate-term oversold in my model for the first time in April (the 30-day correlation b/t USD and SP500 is -0.90)."
U.S. Dollar oversold implications?
As McCullough points out in this morning's Early Look, Commodities (CRB Index) have an inverse correlation (30-day duration) of -0.88 vs. the US Dollar, which explains Oil's pop last week:
"WTI +8% last week (after falling -7% in the week prior) will be as important to watch as anything US Equity Market Beta this week; risk range is signaling a lower-high of $39.99/barrel as Oil Volatility (OVX) signals a higher-low of 43.14."
With the S&P 500 and Commodities inversely correlated to the US Dollar (-0.9), oil and equity investors are clearly begging for a “dovish” Fed.
That raises an important question...
What actually gets investors paid when the Fed goes dovish and tacitly agrees with our Macro team's U.S. #GrowthSlowing call?
Long Bonds (TLT)
(up +9.5% ytd versus +0.2% for S&P 500)
