Takeaway:A closer look at global macro market developments.
Editor's Note: Below are complimentary charts highlighting global equity market developments, S&P 500 sector performance, volume on U.S. stock exchanges, and rates and bond spreads. It's on the house. For more information on how Hedgeye can help you better understand the markets and economy (and stay ahead of consensus) check out our array of investing products.
In this brief excerpt from TheMacro Show yesterday, Hedgeye CEO Keith McCullough denounces Donald Trump who reportedly said that a strong dollar is a big problem. “If you think a strong dollar is a problem, you’re a jackass,” McCullough said. “Strengthening the purchasing power of the people is the answer.”
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Crash Mode: Shanghai Composite Casino Down -44% Since July
Takeaway:Just a few months ago "accelerating" economic data signaled a bottom in equities, according to Old Wall economists. Yeah, well, not so much.
That's the most appropriate word to describe supposedly "accelerating" economic data around the globe a few months ago. The headfake is becoming more evident and is taking the hatchet to some global equity markets.
Below is analysis via Hedgeye CEO Keith McCullough in a note sent to subscribers earlier this morning:
China evidently has not 'bottomed' – neither the made-up Chinese data nor the stock market is healthy right now; Shanghai Comp hammered for a -2.8% loss overnight and remains in #crash mode -44% since July of 2015 (Italy -26% and Nasdaq -10% since then)
CHART OF THE DAY: Why Productivity ↓ = Real Earnings ↓
Editor's note: Below is a brief excerpt and chart from today's Early Look written by Hedgeye U.S. Macro analyst Christian Drake. Click here to learn more.
"... There also exists some equally relavant but less direct associations to the deceleration in employment growth.
As the Chart of the Day below illustrates, while employment growth is slowing it is still rising at a premium to output growth …
Employment Growth > Output Growth: Employment growing faster than output is a different way of saying that productivity is declining and unit labor costs are rising which, in turn, serves as a drag on Profitability …
Input Costs > Output Prices: If the price to produce something (unit labor costs) is growing faster than the price at which that something can be sold (implied by the GDP deflator) then margin pressure will remain ongoing. In a situation of slack demand and declining productivity, employment gains are somewhat bittersweet. A rising employment-to-population ratio is largely paid for via margin compression … which then (unsurprisingly) manifests in the much discussed crescendo of companies reporting adjusted, non-GAAP earnings in an attempt to mask the more dour underlying reality.
Productivity ↓ = Real Earnings ↓: Over the longer-term the trend in productivity drives the trend in real earnings growth. Recall, real earnings are earnings measured in units of goods and services and the more goods and services each person can produce (i.e. productivity) the more each person can consume. Declining profitability and productivity can function in a negative self-reinforcing fashion. Declining profitability disincentivizes business from both hiring and investing and protracted underinvestment will curtail gains in productivity."
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