CLIENT TALKING POINTS
YEN
The Yen signaled immediate-term TRADE oversold within its bullish intermediate-term TREND (Friday’s Real-Time Alert signal); up +0.5% to start the week has the Nikkei fail @Hedgeye TREND resistance, -0.8% overnight ahead of Fed and BOJ meetings.
COPPER
One of the many proxies to pay attention to right now on the “reflation” hope vs. the #Deflation TREND -0.25% this morning after failing to breakout above its MAR high. $2.31/lb Copper and $46 WTI are big resistance levels for us.
UST 10YR
It was a bad week for Long Bond Bulls or the last big buying opportunity of Q2? We say buyem (again) – and buy anything that looks like a safe yield (XLU, EDV, ZROZ) with the UST 10YR tapping the top-end of a 1.70-1.90% immediate-term risk range.
*Tune into The Macro Show with Hedgeye CEO Keith McCullough live in the studio at 9:00AM ET - CLICK HERE.
TOP LONG IDEAS
MCD
McDonald's (MCD) released earnings Friday reporting strong numbers across every important metric. Consider, for example, Q1 EPS $1.23 versus FactSet's consensus estimate of $1.16. Same-store sales in the U.S. were +5.4% vs consensus +4.4%. Revenue in the U.S. was $2.02B vs consensus $1.98B. Company-operating margin was 15.4% vs consensus 14.9% and year-ago 14.3%. We are sticking with our $150 target and believe that $7.00 in EPS for 2017 is not out of the question.
CME
CME Group (CME) which reports on April 28th still has the opportunity for an earnings beat with the +13% year-over-year volume increase coinciding with a +2% increase in pricing power. We have a 1Q16 estimate at $1.18, +3% ahead of consensus. CME stock has positively reacted on earnings the past 5 announcements, rising between +1.5-3.7%.
TLT
The market is currently pricing in a rate hike but not until … late 2017. So if you’re looking for reasons to buy the market at all-time highs, don't expect a boost from incremental Fed policy. To be clear, the dovish Fed commentary of late is a direct result of U.S. growth slowing. Friday’s manufacturing PMI continued its downward trend (it peaked in rate of change terms in August 2014). Clearly, the market gets decelerating growth, which is why Utilities (XLU) are leading equity sector divergences YTD (+9.3%) and the U.S. Treasury 10-year yield down 0.35% over that same period. (That translates into TLT +6.5% and ZROZ +10.2% year-to-date.)
With that being said, the alpha on our long utilities and Long Bonds (TLT & ZROZ) vs. short Junk Bonds (JNK) position has gone against us in the last two months. Notably, we have no direct exposure to commodities or commodity-related sectors, but being short of JNK amidst a huge rally in commodities has not been a good position. Much of the beaten down resource-leveraged credit has rallied.
Asset Allocation
| CASH | 58% | US EQUITIES | 0% | |
| INTL EQUITIES | 0% | COMMODITIES | 6% | |
| FIXED INCOME | 30% | INTL CURRENCIES | 6% |
THREE FOR THE ROAD
TWEET OF THE DAY
In today's Early Look "Ask Me To Believe" I review the bear case on #TheCycle and Nasdaq $QQQ
@KeithMcCullough
QUOTE OF THE DAY
Build your own dreams, or someone else will hire you to build theirs.
Farrah Gray
STAT OF THE DAY
77.6 million Americans live in ZIP codes where Amazon has begun to offer Prime free same-day delivery.
