ROUNDUP: Currency War Consequences, Gold, & The Fed #BeliefSystem

ROUNDUP: Currency War Consequences, Gold, & The Fed #BeliefSystem - currency wars large


Below is analysis from Hedgeye CEO Keith McCullough in a note sent to subscribers earlier this morning:


"Isn’t the Fed burning the US Dollar and Wall St begging for more fun? Not in Japanese and European stock “chart” terms; Euro testing $1.16 vs. USD this am (almost a 4 standard deviation move) and European Equity markets remain in crash mode from their 2015 highs (draw-downs: DAX -20%, Spain’s IBEX -25%, Italy’s MIB -25%)"



So, as the Fed burns the buck, consider the delicious irony of the U.S. Treasury adding China, Germany, and Japan to a "watchlist" of currency manipulators.


Outside the dismal realm of Euro-area equity markets... 


There's always a bull market somewhere, right?


"Instead of down -20% to -27%, Gold (GLD) is already +22% for the YTD! That remains in our Top 3 Macro Long Ideas (Macro Themes Deck) alongside the Long Bond (TLT) and Utilities (XLU) – these ideas all reflect the same view that #GrowthSlowing globally (i.e. economic gravity) can’t be fixed by a central market planning #BeliefSystem this time."



We think a breakdown in the central planning #BeliefSystem will eventually hit the U.S. (investors have already lost faith in central bankers at the ECB and BOJ). A precarius thing to note: The market has largely priced-in a dovish Fed.


So where do we go from here?


As Hedgeye Senior Macro analyst wrote in a recent Early Look, we would need to see a collapse in both growth and inflation expectations for the Fed to provide additional easing and further prop up the markets from here but that would weigh heavily on asset prices.


"We recognize that this is the most risky view to take because the Fed can do whatever it damn well pleases. It’s a board of unelected, unaccountable bureaucrats and, for all we know, President Obama gave Janet Yellen (a known Democrat) marching orders to keep the stock market inflated into the general election.


Who knows? Anything can happen. But fading what is already priced in is where the money will be made from here."


Undoutedly, as the year plays out, there is much more to be revealed. However, there's one thing that we're crystal clear on:


we're sticking with TLT, XLU & GLD.


ROUNDUP: Currency War Consequences, Gold, & The Fed #BeliefSystem - macro calls update

An Unsettling Update On Earnings Season

Takeaway: A breakdown of S&P 500 earnings by sector reveals 6 of 10 have reported negative earnings growth.

An Unsettling Update On Earnings Season - earnings cartoon 04.25.2016


For Q1 Earnings Season to-date, 315 of the 500 companies in the S&P 500 have reported results:

  1. Aggregate SALES growth is down -2.6% year-over-year = worst level of the season so far;
  2. Aggregate EPS growth is down -8.9% year-over-year = worst level of the season so far;
  3. Industrials and Financials have EPS down -7.6% and -13.4% year-over-year, respectively;
  4. Energy earnings are down -96.5% year-over-year


An Unsettling Update On Earnings Season - s p earnings update

5 Not So Insignificant Markets In Full-Blown Crash Mode

5 Not So Insignificant Markets In Full-Blown Crash Mode - Stocks crash test dummies cartoon 02.18.2016 


Around the world, equity markets are teaching investors some subtle risk management lessons. Namely, blindly buying cheap stocks is not always a recipe for success. When economic fundamentals deteriorate, cheap stocks get cheaper.


Case in point, this morning, the European Commission warned of slower Euro-zone growth, while inflation will remain subdued. That put a healthy handicap on European equity markets, many of which remain in crash mode.


Like Spain:






... And Italy:



Meanwhile, over in Asia...


While you were sleeping, the often overlooked reality playing out in Chinese equities just got worse.



By the way...



The Nikkei is still in crash mode.


5 Not So Insignificant Markets In Full-Blown Crash Mode - japan down

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Leading Healthcare Policy Authority Emily Evans Joins Hedgeye



STAMFORD, Conn., May 3, 2016 -- Hedgeye Risk Management, a leading independent provider of investment research and online financial media firm, announced today that healthcare policy authority Emily Evans has joined Hedgeye Potomac Research as a Managing Director to lead its Health Policy sector. Evans has over three decades of professional experience working both in and around government and is regarded as a leading authority in the area.


“We’re very excited to welcome Emily to our growing Washington policy team following our acquisition of Potomac in January,” said Hedgeye CEO Keith McCullough. “She brings an impressive foundation of knowledge and real-world public policy experience. Her insight will augment our existing fundamental Healthcare research led by Tom Tobin. The big winner here is our clients who gain greater visibility into investing developments and implications in one of the most significant U.S. sectors.”


Prior to joining Hedgeye, Evans was a partner at Obsidian Research, a healthcare research boutique that she founded.


Throughout most of her career, she worked in public finance at J.C. Bradford & Co. until its sale to UBS/PaineWebber in 2000. As the Investment Limited Partner in charge of municipal bond underwriting, Evans helped to bring over $10 billion in securities to market – including hundreds of healthcare-related projects such as skilled nursing facilities, continuing care retirement communities and acute care hospitals.


Leading Healthcare Policy Authority Emily Evans Joins Hedgeye - z emily evans   pr picture


“Emily brings deep healthcare policy, regulatory and legislative acumen to the table,” said J.T. Taylor, Managing Director at Hedgeye Potomac Research. “Her addition rounds out our robust Washington to Wall Street research.”


In recent years, Evans has also provided consulting services to the government and finance communities. She served for nine years on the Nashville City Council and is a graduate of Mount Holyoke College.


“I am thrilled to be adding deep healthcare policy, regulatory and legislative research to the robust Hedgeye platform,” said Evans. “This firm is uniquely positioned to deliver high-quality, actionable research to investors interested in that 17 percent of the U.S. economy dedicated to the delivery of healthcare services.”




Hedgeye Risk Management is an independent investment research and online financial media firm. Focused exclusively on generating and delivering investment ideas in a proven buy-side process, the firm combines quantitative, bottom-up and macro analysis with an emphasis on timing. The Hedgeye team features some of the world's most regarded research analysts, all with buy-side experience, covering Macro, Financials, Energy, Healthcare, Retail, Gaming, Lodging & Leisure (GLL), Restaurants, Industrials, Consumer Staples, Internet & Media, Housing, and Materials.



Dan Holland


CHART OF THE DAY: The Latest Of #LateCycle Economic Indicators

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.


"... The latest of #LateCycle economic indicators is obviously employment. That component of the USA’s ISM report remained < 50 (at 49.2) for the 5th consecutive month. Not ironically, NFP (non-farm payrolls) peak, on average, 4-6 months AFTER #TheCycle (GDP) does."


CHART OF THE DAY: The Latest Of #LateCycle Economic Indicators - 05.03.16 Chart

McCullough: The Most Important Point I’ll Make Today


In this brief excerpt from The Macro Show this morning, Hedgeye CEO Keith McCullough explains why “S&P 500 positioning is at its most bullish point of 2016.”

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