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A Precarious Global Growth Setup

Takeaway: U.S. GDP sliding toward zero, Europe struggling with deflation, Japan still flailing as China releases phony (but declining) growth numbers.

 A Precarious Global Growth Setup - stop sign

 

in case you missed it, We'll say it again ... Global growth IS slowing

 

The evidence is obvious to even casual observers by now. U.S. GDP continues its slow slide toward zero, Europe is struggling to beat back deflation, Japan is desperately flailing just to stay afloat, while the Chinese politburo releases phony, albeit still declining, growth numbers.

 

As a result... surprise > global equity markets are getting hammered.

 

Below is equity market analysis via Hedgeye CEO Keith McCullough in a note sent to subscribers this morning:

 

"Buckle in Europe and Japan, that is… most European stock markets signaling immediate-term oversold but Euro not obeying overlord Draghi up at $1.149 this am; European Equities remain in crash mode from last year’s Global Equity Bubble highs; Spain now -26.3%  since this time last year w/ an election (for socialism) pending June 26."

 

 

Heading over to China... 

 

A spate of new reports shines light on the complicated situation evolving in everyone's favorite Communist country.

 

 

In related news, the China Securities Journal noted this morning, "Bad loan ratios rising at majority of Chinese banks in Q1." Meanwhile, Reuters noted the obvious, "Investors to remain wary of China for now."

 

Here's how all of this manifested in Chinese equities today. Spoiler Alert: It's not good.

 

 

it raises serious alarm bells For growth.

 

It also partly explains why Dr. Copper is down yet again this morning despite the recent reflation rally. (Incidentally, we've been warnings subscribers about global #GrowthSlowing for about a year and a half now.)

 

 

The slowdown in China is also handicapping the Australian economy, hence the Reserve Bank of Australia’s decision to cut interest rates to a record low 1.75%.

 

Nice.

 

(Yes, we're highly skeptical the Aussie central bank's efforts will yield fruit.)

 

 

A final rhetorical question... 

 

When global growth slows, what do you own?

 

That's simple... Long Bonds (TLT)

 


A Brief Update On Our Nasdaq Short Call

Takeaway: The Nasdaq is down -3.1% year-to-date and off -8.7% from it's all-time bubble high in July.

A Brief Update On Our Nasdaq Short Call - Bubble bath 9.9.14 large

 

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

 

"I’m done apologizing for adding Nasdaq to our bearish US Growth Equity call on March 31; it was a battle, but month-over-month the Composite Index is -3.1% (SP500 is -0.2%, not up, so chart chasers are having some issues on the long side here); Big Cap Tech in a dead heat with Financial (XLF) and Healthcare (XLV) for worst S&P Sector YTD."

 

 

Notice the dead heat for last place in the year-to-date performance scorecard below (i.e. XLF, XLV and XLK):

 

A Brief Update On Our Nasdaq Short Call - sector update 5 4


CHART OF THE DAY: Fed Growth Predictions = Pure Poppycock

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.

 

"... Given that a recently reported GDP of 0.5% isn’t in the area code of “as expected”, I don’t think Williams has a lot of credibility as a Wall St. forecaster. But Lockhart’s Atlanta Fed actually has a “GDP Now” tracking model (that has recently had an intra-quarter standard error of 200-250 basis points!) that is NOT mixed. It’s flat out bad. So he’s “favoring” non-GDP data."

 

CHART OF THE DAY: Fed Growth Predictions = Pure Poppycock - 05.04.16 chart


Early Look

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Relied upon by big institutional and individual investors across the world, this granular morning newsletter distills the latest and most vital market developments and insures that you are always in the know.

Cartoon of the Day: Slow Grrrrowth!

Cartoon of the Day: Slow Grrrrowth! - growth cartoon 05.03.2016NEW

 

#GrowthSlowing globally (i.e. economic gravity) can’t be fixed by a central market planning #BeliefSystem this time.


Will the Stock Buyback Boom Go Bust?

 

In this brief excerpt from The Macro Show, Hedgeye Senior Macro analyst Darius Dale responds to a subscriber question about whether “financial engineering” can continue to prop up the stock market.


[UNLOCKED] Fund Flow Survey | Not The Longest But The Fastest

Takeaway: Domestic equity mutual funds continue on the sharpest draw down in history averaging losses of $-3.7 billion a week.

Editor's Note: This is a complimentary research note originally published April 28, 2016 by our Financials team. If you would like more info on how you can access our institutional research please email sales@hedgeye.com.

 

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Investment Company Institute Mutual Fund Data and ETF Money Flow:

 

All stock products lost funds in the 5-day period ending April 20th, totaling -$4.0 billion in withdrawals from equity mutual funds, and -$1.9 billion in redemptions from equity ETFs. The following table puts historical context around the current losing streak within domestic equity funds which is now the second longest at 60 weeks and continues to be the fastest on record with investors pulling -$3.7 billion per week.

 

[UNLOCKED] Fund Flow Survey | Not The Longest But The Fastest - ICI20

 

In the most recent 5-day period ending April 20th, total equity mutual funds put up net outflows of -$4.0 billion, trailing the year-to-date weekly average outflow of -$1.6 billion and the 2015 average outflow of -$1.6 billion.

 

Fixed income mutual funds put up net inflows of +$4.3 billion, outpacing the year-to-date weekly average inflow of +$1.8 billion and the 2015 average outflow of -$475 million.

 

Equity ETFs had net redemptions of -$1.9 billion, trailing the year-to-date weekly average outflow of -$1.0 billion and the 2015 average inflow of +$2.8 billion. Fixed income ETFs had net inflows of +$1.5 billion, trailing the year-to-date weekly average inflow of +$1.8 billion but outpacing the 2015 average inflow of +$1.0 billion.

 

[UNLOCKED] Fund Flow Survey | Not The Longest But The Fastest - ICI1

 

Mutual fund flow data is collected weekly from the Investment Company Institute (ICI) and represents a survey of 95% of the investment management industry's mutual fund assets. Mutual fund data largely reflects the actions of retail investors. Exchange traded fund (ETF) information is extracted from Bloomberg and is matched to the same weekly reporting schedule as the ICI mutual fund data. According to industry leader Blackrock (BLK), U.S. ETF participation is 60% institutional investors and 40% retail investors.



Most Recent 12 Week Flow in Millions by Mutual Fund Product: Chart data is the most recent 12 weeks from the ICI mutual fund survey and includes the weekly average for 2015 and the weekly year-to-date average for 2016:

 

[UNLOCKED] Fund Flow Survey | Not The Longest But The Fastest - ICI2

 

[UNLOCKED] Fund Flow Survey | Not The Longest But The Fastest - ICI3

 

[UNLOCKED] Fund Flow Survey | Not The Longest But The Fastest - ICI4

 

[UNLOCKED] Fund Flow Survey | Not The Longest But The Fastest - ICI5

 

[UNLOCKED] Fund Flow Survey | Not The Longest But The Fastest - ICI6



Cumulative Annual Flow in Millions by Mutual Fund Product: Chart data is the cumulative fund flow from the ICI mutual fund survey for each year starting with 2008.

 

[UNLOCKED] Fund Flow Survey | Not The Longest But The Fastest - ICI12

 

[UNLOCKED] Fund Flow Survey | Not The Longest But The Fastest - ICI13

 

[UNLOCKED] Fund Flow Survey | Not The Longest But The Fastest - ICI14

 

[UNLOCKED] Fund Flow Survey | Not The Longest But The Fastest - ICI15

 

[UNLOCKED] Fund Flow Survey | Not The Longest But The Fastest - ICI16



Most Recent 12 Week Flow within Equity and Fixed Income Exchange Traded Funds: Chart data is the most recent 12 weeks from Bloomberg's ETF database (matched to the Wednesday to Wednesday reporting format of the ICI), the weekly average for 2015, and the weekly year-to-date average for 2016. In the third table are the results of the weekly flows into and out of the major market and sector SPDRs:

 

[UNLOCKED] Fund Flow Survey | Not The Longest But The Fastest - ICI7

 

[UNLOCKED] Fund Flow Survey | Not The Longest But The Fastest - ICI8



Sector and Asset Class Weekly ETF and Year-to-Date Results: In sector SPDR callouts, the industrials XLI ETF gained +$399 million or +6% last week.

 

[UNLOCKED] Fund Flow Survey | Not The Longest But The Fastest - ICI9



Cumulative Annual Flow in Millions within Equity and Fixed Income Exchange Traded Funds: Chart data is the cumulative fund flow from Bloomberg's ETF database for each year starting with 2013.

 

[UNLOCKED] Fund Flow Survey | Not The Longest But The Fastest - ICI17

 

[UNLOCKED] Fund Flow Survey | Not The Longest But The Fastest - ICI18



Net Results:

The net of total equity mutual fund and ETF flows against total bond mutual fund and ETF flows totaled a negative -$11.7 billion spread for the week (-$5.9 billion of total equity outflow net of the +$5.7 billion inflow to fixed income; positive numbers imply greater money flow to stocks; negative numbers imply greater money flow to bonds). The 52-week moving average is -$977 million (negative numbers imply more positive money flow to bonds for the week) with a 52-week high of +$20.2 billion (more positive money flow to equities) and a 52-week low of -$19.0 billion (negative numbers imply more positive money flow to bonds for the week.)

  

[UNLOCKED] Fund Flow Survey | Not The Longest But The Fastest - ICI10

 


Exposures:
The weekly data herein is important for the public asset managers with trends in mutual funds and ETFs impacting the companies with the following estimated revenue impact:

 

[UNLOCKED] Fund Flow Survey | Not The Longest But The Fastest - ICI11


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