The Key Takeaways From Today's Fed Statement

Takeaway: "Interestingly, this might be the most in line with Hedgeye's research outlook the Fed has been since spring of 2013 when we were bullish."

The Key Takeaways From Today's Fed Statement - Fed lady cartoon 06.25.2016


My take on the initial market read through directly following today's Fed announcement?


NO ONE knows what the "F" to do. It's total pandemonium out here. Do we buy or sell the USD? Do we buy or sell Treasuries? How about stocks?


The chart below offers a nice picture of all the confusion created by today's Fed statement:


The Key Takeaways From Today's Fed Statement - dale jpy currency


Notwithstanding the initial market reaction, our reading of the FOMC statement is:


  1. U.S. Recession risk is rising
  2. Weak Dollar reflates EM


Interestingly enough, this might be the most in line with Hedgeye's research outlook the Fed has been since spring of 2013 when we were wildly bullish. The Fed acknowledged our #GrowthSlowing view -- which itself is actually about to get a lot worse.


(Note the sea of red in our compendium of U.S. economic data below)



The Key Takeaways From Today's Fed Statement - dale eco data


In fact, the entire first paragraph of the FOMC statement reads like the economy is headed into #Quad4 led by the consumer:


Click the image below to enlarge.

The Key Takeaways From Today's Fed Statement - dale fed paragraph


so ... now what?


A follower of mine on Twitter remarked that Fed potency is waning and next up would be QE4. I agree, but you're not going to get QE4 without first having another "flush." Furthermore, we've always maintained that if the Fed pivots too bearish on the U.S., it will freak investors out as it always has:



The Key Takeaways From Today's Fed Statement - dale fed



some simple advice for investors... 



Want more? Watch Darius and Hedgeye CEO Keith McCullough in the new video below.

Cartoon of the Day: Choppy Waters

Cartoon of the Day: Choppy Waters - Dollar cartoon 04.27.2016


Permabulls are desperately hoping and praying that a dovish Janet Yellen will continue devaluing the U.S. Dollar to keep propping up stocks.

FLASHBACK | Rickards to McCullough: Central Planners Destroying America

Takeaway: "They are destroying America. They just don't realize it."

In honor of Fed Day, we highlight this Rickards gem from the HedgeyeTV vault.


Here's a short excerpt of a wide-ranging conversation Hedgeye CEO Keith McCullough had with best-selling author James Rickards a while back as part of HedgeyeTV's Real Conversations series. 


investing ideas

Risk Managed Long Term Investing for Pros

Hedgeye CEO Keith McCullough handpicks the “best of the best” long and short ideas delivered to him by our team of over 30 research analysts across myriad sectors.

PHS | What's the Catalyst?

Takeaway: Mild weather helped juice the March PHS print, but even so total contracts signed for existing homes only rose 1% Y/Y.

Our Hedgeye Housing Compendium table (below) aspires to present the state of the housing market in a visually-friendly format that takes about 30 seconds to consume.



PHS | What's the Catalyst? - Compendium 042716


Today’s Focus: March Pending Home Sales 

Pending Home Sales in March rose +1.4% sequentially and accelerated +70bps sequentially to +1.4% year-over-year.  Much of the strength was driven by the strong +18.4% comp out of the Northeast, which likely has weather written all over it.


That +1% YoY growth could be considered “a beat” speaks well to the prevailing environment.


If there was an official Hedgeye Housing Manifesto, the primary prescriptive notion would be that everything that matters happens on the margin.  That is, the forecasting goal centers on divining better/worse not good/bad and front-running those inflections. 


The current challenge – with HMI, NHS, Starts, & PHS all flat for the last year - is that nothing is really happening at the margin and a crawling 2nd derivative convergence to zero isn’t alpha’s playground. 


To frame-up and put some quick context around the nearer-term setup:  Demand comps in the existing market get harder the next few months and, at current levels of activity, transaction volumes would be down ~-1% in Apr/May.  If continued sequential improvement were to persist, demand growth would run 0% to +2% YoY over the next quarter+. 


So, -2%-to-+2% is your fundamental demand backdrop through the balance of 1H16.   Note, also, that (unlike NHS/Starts) existing sales have already fully mean-reverted back above average historical levels of activity so the easy asymmetry/upside has already been captured. 


Summarily, with demand stagnating, price growth beginning to roll, supply constraints persisting, the preponderance of domestic macro data decelerating and no discrete, large-scale catalysts we're not seeing much for housing bulls to hang their hat on here presently. 




 PHS | What's the Catalyst? - PHS Units   YoY


PHS | What's the Catalyst? - PHS Regional YoY


PHS | What's the Catalyst? - PHS LT




About Pending Home Sales:

The Pending Home Sales Index is a monthly data release from the National Association of Realtors (NAR) and is considered a leading indicator for housing activity in the US. It is a leading indicator for Existing Home Sales, not New Home Sales. A pending home sale reflects the signing of a contract, but not the closing of the transaction, which occurs 1-2 months later. The NAR uses data from the MLS and large brokers to calculate the Pending Home Sales index. An index value of 100 corresponds to the average level of activity during 2001.



The NAR Pending Home Sales index is released between the 25th and the 31st of each month and covers data from the prior month.




Joshua Steiner, CFA


Christian B. Drake

Trump Batting 1,000. Hillary Trounces Bernie. Next Stop Indiana...

Below is a brief excerpt from our Potomac Research Group colleague and Chief Political Strategist JT Taylor's Morning Bullets sent to institutional clients each morning. For more information on how you can access our institutional research please email



Trump Batting 1,000. Hillary Trounces Bernie. Next Stop Indiana... - trump pic


Trump is batting 1000 after winning the past six states, and is now just a handful delegates shy of reaching 1000 - leaving him approximately 250 away from clinching the nomination.  His victory last night was the most commanding to date winning by larger margins and expanding his support across all voter demographics - even surprising Trump and his team. Next week's contest in IN becomes the next (and last?) battleground for the anti-Trump forces; the latest polls show Trump with a single digit lead over Ted Cruz and Trump will pour everything he has into winning the Hoosier state. He knows his chances of winning the nomination without 1,237 delegates could wreak havoc in Cleveland just as he'll be looking to unify the party. If Trump wins big in IN, it eases the pressure to dominate CA - but if he loses IN, then he'll have to grind it out until the very end.


Trump Batting 1,000. Hillary Trounces Bernie. Next Stop Indiana... - hillary clinton


Yesterday's results extinguished Bernie Sanders' hopes to win the Democratic nomination. Hillary Clinton dominated the Northeast primary - winning four out of five contests and racking up more delegates than Bernie Sanders and is now sitting on 2,117 delegates and super delegates (with 2,383 needed to win). Sanders cannot surpass Clinton, though it doesn't look as if he's going quietly into the night - his goal now is to impact the Democratic platform and prevent Clinton from moving to the center potentially handicapping her going into the general election. Clinton is now rounding third with hopes of crossing the plate well-before the convention starts in Philly, and will work to convince Sanders - and more importantly his followers -  to support her.


Billionaire Democratic donor Tom Steyer has committed to spending $25 million through his climate change focused superPAC to drive turnout for Hillary Clinton in general election battleground states. The campaign will focus on younger voters - who so far have been reluctant to back Clinton and have flocked to Sanders - but whose support is vital to ensuring she can reassemble the coalition that carried Obama to victory, especially if Trump is able to overwhelmingly carry older, white voters. We expect to see similar voter drive campaigns launch into full swing as the primaries wind down.  


In the final stretch of the Republican nomination battle, the clash over the Party's soul is starting to ramp up. As we mentioned earlier in the year, Speaker Paul Ryan's task forces are finalizing concrete legislative proposals on health care, taxes, and national security to be released prior to Cleveland. This will help Ryan and Co. recapture the Party narrative from Trump or Cruz, and also give vulnerable Republicans a platform to run on in November separate and apart from the potentially toxic campaign of whoever becomes the Republican nominee.

The Most Regressive Tax Of All? A Weak Dollar

Takeaway: Average working Americans get hammered by a weak U.S. Dollar, while Fed-fueled monetary policy enriches wealthy investors.

Ahead of today's important Fed announcement, permabulls are desperately hoping and praying that a dovish Janet Yellen will continue devaluing the U.S. Dollar to keep propping up stocks.


Below are two charts showing why a weak dollar is perpetuating a massive wealth gap


Click to enlarge

The Most Regressive Tax Of All? A Weak Dollar - dale weak dollar




The Most Regressive Tax Of All? A Weak Dollar - dale inequality



***You can follow Darius Dale on Twitter @HedgeyeDDale

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