In this brief excerpt from The Macro Show this morning, Hedgeye CEO Keith McCullough explains why he’s not going to be the “crazy one” buying U.S. stocks at this point.
Takeaway: Short interest in the S&P 500 is the lowest its been since mid-December.
Investor sentiment is one of the key indicators we track.
Unsurprisingly, what happens over the course of the market cycle is that most investors are:
- Most bearish at the market lows
- Most bullish at the top
As Hedgeye Senior Macro analyst Darius Dale and CEO Keith McCullough discussed on The Macro Show this morning, that's exactly what we're witnessing right now in non-commercial S&P 500 futures and options positioning. As you can see in the chart below, short interest in the S&P 500 is the lowest its been since mid-December.
Remember what happened next?
Click to enlarge
Keep your head up out there.
Takeaway: Ignore what's going on around you at your own peril.
QUESTION FOR YOU ... What's changed?
That may be the most important question to ask yourself right now. Here's the answer. Nothing. Nothing has changed. And that's why we're holding the line on our bearish thesis.
It was our non-consensus call heading into 2016 ... and we continue to flag the risk that U.S. economic growth continues its slide from 3% to 2% to 1%. Meanwhile, corporate profits continue to contract and are on pace for the third consecutive quarter of declines. (Click here for an update on Q1 earnings.)
More on macro markets this morning via Hedgeye CEO Keith McCullough in a note sent to subscribers. Take a look at Copper:
"One of the many proxies to pay attention to right now on the “reflation” hope vs. the #Deflation TREND - -0.25% this am after failing to breakout above its MAR high; $2.31/lb Copper and $46 WTI are big resistance levels for me."
meanwhile, over to Europe...
After a reading of German business sentiment failed to meet expectations, Euro-zone permabulls continue to be battered by these ugly economic realities:
That's why countries like Italy remain in crash mode.
heading over to Asia...
Here's the Shanghai Comp Casino today:
... And Japan:
So, what should you own? As McCullough noted on The Macro Show today, Long Bonds (TLT, ZROZ, EDV) are "the most obvious position you should have" on U.S. growth slowing. Here's McCullough's incremental Monday morning update:
"Was it a bad week for Long Bond Bulls or the last big buying opportunity of Q2? I say buyem (again) – and buy anything that looks like a safe yield (XLU, EDV, ZROZ) with the 10yr tapping the top-end of a 1.70-1.90% immediate-term risk range."
Back to reality this Monday morning.
daily macro intelligence
Relied upon by big institutional and individual investors across the world, this granular morning newsletter distills the latest and most vital market developments and insures that you are always in the know.
Editor's Note: Below is a brief excerpt and chart from today's Early Look written by Hedgeye CEO Keith McCullough. Click here to learn more.
"... Do (or did) you believe that growth would slow this fast, from 3% to 2% to 1%?
Or did you believe in it so clearly that you knew that the Financials (XLF) would start Earnings Season with the following reality:
- 32 of 90 “Financials” in the SP500 have reported their respective quarter
- Aggregate Earnings (non-GAAP!) are currently -17.0% year-over-year
- Financials (XLF) had their “reflation” rally now too (back to -1.2% YTD)"
Our deep bench of analysts take to HedgeyeTV every weekday to update subscribers on Hedgeye's high conviction stock ideas and evolving macro trends. Whether it's on The Macro Show, Real-Time Alerts Live or other exclusive live events, HedgeyeTV is always chock full of insight.
Below is a taste of the most recent week in HedgeyeTV. (Like what you see? Click here to subscribe for free to our YouTube channel.)
1. About Everything | The Golden Age of Home Improvement (4/23/2016)
In this complimentary edition of About Everything, renowned demographer and Hedgeye Sector Head Neil Howe explores why consumer spending on home improvement is outstripping GDP growth and the key demographic trends behind this shift. (Click here to read the associated About Everything writeup.)
2. Under 60 Seconds: Starbucks Earnings Report | $SBUX (4/22/2016)
Hedgeye Restaurants analyst Howard Penney highlights three key points from Starbucks’ lackluster earnings report. Earlier this month, Penney advised our subscribers to short the stock.
3. Dale: ‘Brexit Is The #1 Risk In The U.K.’ (4/22/2016)
With the U.K. divided over whether to stay or leave the European Union, Hedgeye Senior Macro analyst Darius Dale discussed the potential impact on the pound, equities and consumer/business confidence on The Macro Show this morning.
4. REPLAY | Healthcare Earnings Preview of Top Ideas and Q&A - $ZBH $ATHN $MDRX $MD $HOLX $ILMN (4/21/2016)
In this HedgeyeTV live Q&A from earlier this week, our Healthcare analysts Tom Tobin and Andrew Freedman provide key earnings previews ahead of healthcare earnings season.
- ZBH: Read-through from SYK and JNJ earnings
- ATHN: Tracker Update, will they miss the doc count?
- MDRX: latest thoughts on attrition
- MD: Maternity Tracker Update
- HOLX: Facility Penetration by MSA
- ILMN: Opportunity or is the end just beginning?
Click here to access the associated slides.
5. U.S. Economy Enters Most Difficult Part of Cycle (4/20/2016)
In this brief excerpt from The Macro Show, Hedgeye Senior Macro analyst Darius Dale discusses how the U.S. economy has entered the toughest part of the cycle and why our growth estimate remains so bearish.
6. Eye on Earnings: Brinker International $EAT (4/19/2016)
Hedgeye's Restaurants team shares their three conclusions from Brinker's earnings report.
7. Cruise Liner Earnings: What We’re Most Focused On (4/19/2016)
In this brief excerpt from The Macro Show this morning, Hedgeye Gaming, Lodging & Leisure Sector Head Todd Jordan highlights the key issues his team is most focused on right now as we enter earnings season.
8. $25 or $50 Oil? Here’s What McMonigle Says (4/18/2016)
In this brief excerpt from The Macro Show this morning, Hedgeye Energy Policy Analyst Joe McMonigle explains why he believes oil prices are going lower in the short term, and where he sees it heading in the months to come.
Our cartoonist Bob Rich captures the tenor on Wall Street every weekday in Hedgeye's widely-acclaimed Cartoon of the Day. Below are his five latest cartoons. We hope you enjoy his humor and wit as filtered through Hedgeye's market insights. (Click here to receive our daily cartoon for free.)
1. Just Believe (4/22/2016)
Central banker credibility is slowly waning.
2. A Closer Look At NIRP (4/21/2016)
BOJ governor Haruhiko Kuroda has been defending the central bank's negative interest rate policy recently, even stressing his readiness to expand monetary policy still further. "Good luck with that," Hedgeye CEO Keith McCullough wrote recently. "These guys just don't get it. The #BeliefSystem is breaking down."
3. Painting Themselves Into A Corner (4/20/2016)
The #BeliefSystem that central planners can arrest economic gravity is breaking down.
4. A Holy Mess (4/19/2016)
Amid the impeachment process of Brazilian President Rouseff, Brazil's Bovespa Index is up +39.4% over the past 3 months. Setting aside widespread corruption in the country, Hedgeye Senior Macro analyst Darius Dale had this to say about Brazil in this morning's Early Look, "We think Brazilian capital and currency markets are priced to perfection and anticipate another flush down alongside other reflation assets over the intermediate term."
5. No Oil Freeze (4/18/2016)
On Friday, Hedgeye colleague and Potomac Research Group Senior Energy analyst Joe McMonigle wrote, "We believe there is no chance Saudi Arabia reverses its position and agrees to freeze production on Sunday," after Iran announced it would skip the much-hyped oil "freeze" meeting in Doha. That proved prescient. Over the weekend, OPEC members, including Saudi Arabia, and non-OPEC countries, like Russia, failed to reach an agreement to freeze oil production.
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