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CHART OF THE DAY: A Review Of Crowded 'Dovish Fed' Positioning

Editor's Note: Below is a brief excerpt and chart from today's Early Look written by Senior Macro analyst Darius Dale. Click here to learn more. 

 

"... We strongly believe that investor sentiment is overwhelmingly skewed towards a dovish Fed and, as a result, positioning has become rather crowded on the bearish side of the USD and on the bullish side of reflation, in relative terms. Said differently, in one way or another, most investors have already positioned their portfolios for a dovish Fed.

 

So who is the marginal buyer of risk assets from here?" 

 

CHART OF THE DAY: A Review Of Crowded 'Dovish Fed' Positioning - 4 28 Chart of the Day


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)

 

CLICK Text TO ENLARGE.

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:

 

CLICK TO ENLARGE.

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.


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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. 

 


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 sales@hedgeye.com.

 

TRUMP'S THUMPING

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.

A LEAGUE OF HER OWN

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.

MILLION$ ON MILLENNIAL$

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.  

RYAN'S ROUTE

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

#1 

Click to enlarge

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

 

#2

CLICK TO ENLARGE

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

 

 

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


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