My Thoughts On This Lousy GDP Report

Takeaway: We're the only firm to have called the slow-down from its 2015 cycle peak.

This morning's bad 0.5% US GDP report didn't surprise us. It didn't surprise the Long End of The Curve (Long Bond) either. We're the only firm to have called the slow-down from its 2015 cycle peak.

My Thoughts On This Lousy GDP Report  - GDP cartoon 10.29.2015


Macro markets have been discounting GDP #GrowthSlowing for months now. That's why the Fed has pivoted back to dovish, devaluing the Dollar, in a last gasp hope to "reflate" asset prices. 


In the next 3 months, we think the probability is at its highest point that US GDP goes negative sequentially (Hedgeye Predictive Tracking Algo is currently forecasting +0.3% QoQ SAAR for Q2). While many are trying to make the argument (Bloomberg, CNBC, etc.) that GDP "doesn't matter" like it used to ... we've never traveled with that conflict of interest crowd, and we won't this time either. (See Shame On You Mark Zandi for more on this).


Instead, we'll remind you that there is an epic amount of credit cycle risk associated with the profit cycle going to negative on a year-over-year basis. And tell you to short both Junk and High Yield (again).


As my colleague Darius Dale wrote in a note to institutional subscribers today,


Assuming Q1 isn’t revised in any material way, our forecast for 1H16E represents the slowest pace of domestic economic growth on a multi-quarter basis since 2H12. Any downside surprises from there will surely translate to renewed recession fears.


Stay long The Long Bond, Utilities, Gold, MCD, etc.

Cartoon of the Day: High Finance

Cartoon of the Day: High Finance - Easy money cartoon 04.28.2016


This one speaks for itself.

REPLAY: Healthcare Earnings Takeaways | $ATHN $HOLX $MD $ZBH

WAtch the replay below. click here to access the associated slides.



After a busy week of earnings, our Healthcare analysts Tom Tobin and Andrew Freedman provided a recap and takeaways of our top ideas athenahealth (ATHN), MEDNAX (MD), Hologic (HOLX) and Zimmer-Biomet (ZBH).



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The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.52%
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A Look At Wall Street's Ex-Energy Earnings Fallacy

Takeaway: Well into earnings season, six of ten S&P 500 sectors have negative earnings growth.

A Look At Wall Street's Ex-Energy Earnings Fallacy - earnings cartoon 04.12.2016


It's earnings season.


Permabulls on Wall Street are terribly fond of the narrative that "Ex-Energy" earnings look great! We understand this proclivity, Energy earnings are terrible (down -132% so far). Just look at the chart below.


Click to enlarge

A Look At Wall Street's Ex-Energy Earnings Fallacy - earnings q1


But what this narrative lacks is cohesiveness. In fact, six of ten S&P 500 sectors have negative earnings growth so far, with Financials (-14.1%) and Materials (-14.8%) companies putting up double-digit earnings losses.


In other words, Energy has company.


Here's a thought... Since permabulls are more than happy to strip battered sectors out of earnings, why not (for the sake of consistency) just go ahead and strip out the performance of Energy, Financials and Materials companies from the recent market rally as well? Oh yea, because those sectors have led the pack. 


Bottom Line: Stripping out sectors of the S&P 500 to fit some permabull narrative is as nonsensical, as it is wrong. 

About Everything | The Surge in Mental Health Services


In this complimentary edition of About Everything, renowned demographer and Hedgeye Sector Head Neil Howe discusses why "mental health services spending is riding a long-term attitudinal shift that has brought mental health issues out into the open." Howe explains why it's happening and explores the broader societal and investing implications.


Click here to read Howe’s associated About Everything piece.

Who Do You Believe? Consensus GDP Estimates or Hedgeye?

Takeaway: Wall Street consensus has been consistently out to lunch on U.S. growth slowing, as our bearish expectations continue to play out.

Who Do You Believe? Consensus GDP Estimates or Hedgeye? - growth  cartoon 04.05.2016


The Hedgeye Macro team has been predicting dour U.S. economic growth for over a year. Our contrarian economic call has been pretty close to spot on. Meanwhile, this #GrowthSlowing reality has consistently confounded Wall Street consensus.


As you can see in the chart below, Wall Street economists were predicting almost 3% growth for Q1 2016 last April. 


To be clear, Old Wall consensus was forced to ratchet back its inflated estimate to 2.5% in February 2016 ... all the way down to 1.1% most recently. Of course, the initial Q1 GDP reading today came in at 0.5%. That surprised even us to the downside, as we have been predicting 1%. 


Who Do You Believe? Consensus GDP Estimates or Hedgeye? - Q1 Wall Street GDP


Will this slowdown persist?


Wall Street doesn't think so. The consensus estimate for Q2 2016 is a (drum roll please)...



Meanwhile, here at Hedgeye we're predicting 0.3%


Who do you believe?


Watch Hedgeye Senior Macro analyst Darius Dale explain why we're so bearish in the video below:


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