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Trump's Big Night ... Hillary's Homestretch ... Harry Reid's Final Prophecy

Below is a brief excerpt from Hedgeye Potomac 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 BIG KNIGHT:

Trump's Big Night ... Hillary's Homestretch ... Harry Reid's Final Prophecy - trump flag

 

Polls show that Trump is heading for a big win in IN, as he moves closer to being the presumptive Republican nominee. Ted Cruz hopes that the alignment of Republican stars - including the tepid support of IN Governor Mike Pence - will help him pull off a victory that breaks Trump's streak.

 

John Kasich has already abandoned IN, but still looks likely to receive a sizable number of votes - especially those from anti-Trump voters who are critically needed by Cruz to put him over the top. If Trump wins big tonight, he will only need ~50% of the remaining delegates to clinch the nomination - and momentum already has propelled him to a 30+ point lead in CA.

exacerba-TED: 

Trump's Big Night ... Hillary's Homestretch ... Harry Reid's Final Prophecy - cruz cruz

 

It's not just losing primaries that has Cruz's campaign concerned - his strategy of winning the nomination on the second ballot may also be crumbling. To date, Cruz has been very successful at nabbing delegate spots for his supporters in behind-the-scenes maneuvering at state conventions, but the loyalty of these supporters once they become unpledged is increasingly being questioned.

 

Combined with his underperformance in PA, and a loss in IN - a delegate desertion would sound the death knell for Cruz's campaign even before Trump potentially hits 1237.

HILLARY'S HOOSIER HOMESTRETCH?:

Trump's Big Night ... Hillary's Homestretch ... Harry Reid's Final Prophecy - hillary clinton 222

 

For the first time in months, Hillary Clinton's campaign out-fundraised Bernie Sanders $36 million to $26 million. Sanders soldiers on and vows that there will be a contested convention, but if he loses in IN today he will be hanging by a thread, and will continue to be the thorn in Clinton's side.

 

If he can pull off a win, it will change the narrative back in his favor, especially going into KY, NE, and WV - all states that are more favorable terrain to him - but he would have to take 65 percent of the remaining delegates to clinch the nomination. A Clinton victory allows her to keep her focus on Donald Trump and the big picture, but it may come down to the bottom of the ninth tonight...

REID'S LAST WILL:

With retirement on the horizon, Minority Leader Harry Reid has expressed certainty that Democrats will retake the Senate this fall, and is confidently passing the leadership reigns over to Sen. Chuck Schumer. Despite Schumer's almost certain re-election in deep blue NY, he has gone all out on fundraising, and currently has $26 million on-hand.

 

This war chest should serve as a potent weapon for Schumer, who can funnel millions of dollars to candidates and committees - and help ensure Reid's prophecy comes true.


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


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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:

 

 

Germany...

 

 

... 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


Leading Healthcare Policy Authority Emily Evans Joins Hedgeye

FOR IMMEDIATE RELEASE

 

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.”

 

ABOUT HEDGEYE RISK MANAGEMENT

 

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.

 

CONTACT

Dan Holland

dholland@hedgeye.com

203.562.6500


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


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