Daily Market Data Dump: Tuesday

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




Daily Market Data Dump: Tuesday - equity markets 5 10


Daily Market Data Dump: Tuesday - sector performance 5 10


Daily Market Data Dump: Tuesday - volume 5 10


Daily Market Data Dump: Tuesday - rates and spreads 5 10

Morning Bullets 5/10/16

Trump's Troubling Numbers, Sanders' Other Math Problem; Will Carried Interest be the New Inversions?


TRUMP'S TROUBLING NUMBERS:   Donald Trump is under fire for waffling on the pillars of his economic plans. We think he has a bigger numbers problem - and his difficult task of winning over key demographics (particularly Hispanics) may have just gotten harder. Yes, his unfavorables are at a historic high for a major party nominee; and yes, his misguided attempts to win over those groups (think: TacoGate 2016) have not done him any favors. But that may be nothing compared to the impending "Hispanic backlash."  Trump is backed up against a big border wall for a number of reasons: he has a net favorability among Latinos of negative 78% (while Hillary Clinton is at +29%).  Since 1980, no Republican has won the White House without locking down at least 30% of the Hispanic vote, and Hispanic registration is up in a number of key states - CA, CO, NV and FL - to name a few. 

BERNIE SANDERS' WAR ON MATH: The Democratic underdog is fighting over big numbers again, and this time they're coming at him from the left. The left-leaning Urban Institute did the math on Sanders' "Medicare for all" program estimating it would increase federal spending by $32 trillion over 10 years - yes, that's trillion with a T.  Sanders had previously estimated the cost to be closer to a measly $13.8 trillion. But West Virginians don't seem too concerned. Despite Sanders' long list of policy proposals with no clear way to pay for them, he is likely to pick off another win in WVA today and the Democratic contest will just keep dragging on. 

CARRIED INTEREST, THE NEW INVERSIONS?  Tax Notes recently suggested the Obama Administration could use the regulatory process to close the so-called "carried interest loophole." Treasury officials responded in an eerily similar tone it used during the run-up to recently-released inversion guidance, saying closing the loophole was a top priority and that Treasury is "continuing to explore its existing authority...but the department cannot eliminate the carried interest tax benefit by itself."  Given the heat they are taking on their unilateral action on inversions, we would be surprised to see Treasury take on another battle.  But given Clinton, Sanders and Trump have all criticized the carried interest provision, the rhetoric on this issue will likely heat up just in time for the summer.

ANYTHING BUT REGULAR ORDER: When he became Senate Majority Leader in 2015, Mitch McConnell promised a return to "regular order" when considering legislation.  He specifically wanted to avoid more short-term government funding patches by passing all 12 appropriations bills that fund government programs and agencies - something that has not happened since 1994.  Fast forward to present - the Senate has failed to pass a budget for 2017 and is now stuck on the first funding bill out of the gate, the Energy and Water Appropriations bill, over an issue related to Iran.  Despite McConnell's worthwhile goal, we fear short-term funding patches and looming shutdowns are destined to be the new normal.  Driving off these cliffs are predictably avoided, but in ever-decreasing dramatic fashion. A new Administration could change this - but not as long as Congress remains as polarized as it is.       

CHART OF THE DAY: How To Play US #GrowthSlowing

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.


"... Back to REITS, in stark contrast to what they did vs. Utilities when #Deflation dominated in JAN-FEB 2016 (REITS got crushed), they’ve really started to rip higher post the ugly 0.5% GDP report and another rate-of-change slow-down in non-farm payroll (NFP) growth:

  1. The Vanguard REIT ETF is pulverizing the Financials (XLF -1% in May) and is now +8.5% YTD
  2. Vs. Utilities (XLU) which continues its impressive, but steady, march higher to +13.5% YTD"


CHART OF THE DAY: How To Play US #GrowthSlowing - 05.10.16 EL Chart

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Making America Weak Again

“The cheap dollar tactic started a currency war that has been playing out ever since.”

-Jim Rickards


In The New Case For Gold, Rickards reviews a critical period in American history that Ben Bernanke refuses to have the courage to admit. “Though it seems like an extraordinary policy to adopt, since 2010 the US government has effectively abandoned the sound dollar.”


“In January of that year, the United States ended the sound dollar policy that prevailed since 1980. An intentional policy of cheapening the dollar to encourage inflation and nominal growth was commenced.” (pg 120)


This Weak Dollar Policy, of course, has been tried before. If you want to see Trump make America weak again, you should vote for him so that he can triple down on what Nixon/Carter did in the 1970s inasmuch as Bush/Obama did in the most recent decade. It’ll be you-ge!


Making America Weak Again - trump point


Back to the Global Macro Grind


As any bi-partisan and/or objective student of Economic History can teach you, weakening a currency weakens the purchasing power of The People who earn their living (and have to pay to live) in that currency.


Given that you have two deteriorating Boomer Brands (Republican and Democrat parties) fighting over how much their political and corporate leaders should get paid in devalued Dollars, I’m surprised that someone isn’t running on the basic principle of sound money.


Instead of sounding creepy like Cruz, I’d bet my entire net wealth that I could lay a beat-down on Trump in a US Dollar debate. But, who knows, maybe I’ll just get to beat on Mr. Big Time for the next 4-5 years on Twitter instead.


In the meantime, despite the Fed’s renewed Dovish Down Dollar policy in 2016, what’s really getting beaten up are America’s profits:


  1. 441 of 500 S&P 500 companies have reported their Q1 2016 numbers
  2. Aggregate SALES growth is DOWN -2.4% year-over-year
  3. Aggregate EARNINGS growth is DOWN -8.9% year-over-year
  4. Ex-Energy (EPS -109% y/y), Financials have EARNINGS DOWN -14.3% year-over-year
  5. Ex-Energy, Technology has EARNINGS DOWN -8.4% year-over-year


Yeah, I know. Everyone nailed calling #TheCycle and this is all going to be fine. But when? Are Financials (banks, brokers, asset managers, etc.) going to crush it under a Down Dollar Trump and/or Hillary currency policy?


Maybe that’s why REITs have gone parabolic in the last few weeks. Have you seen my boy Big Time’s comments on how to protect his Dad’s original rental/real estate holdings? “I love debt!” And, ‘believe me, the US can never default because we can print money.’


I’m not yet dumb (or is it numb?) enough yet to believe everything Big Time says, but I can believe that he’d print money in order to try to protect his own interests above The People’s.


Don’t forget that RENT remains the largest component of the median US consumer’s cost of living (24% of total expenditures vs. something like gas at 4%) … and it remains at all-time highs.


Back to REITS, in stark contrast to what they did vs. Utilities when #Deflation dominated in JAN-FEB 2016 (REITS got crushed), they’ve really started to rip higher post the ugly 0.5% GDP report and another rate-of-change slow-down in non-farm payroll (NFP) growth:


  1. The Vanguard REIT ETF is pulverizing the Financials (XLF -1% in May) and is now +8.5% YTD
  2. Vs. Utilities (XLU) which continues its impressive, but steady, march higher to +13.5% YTD


Since I do believe that Big Time’s chances at becoming President are higher than Wall St. consensus, shouldn’t I consider adding REITS to our Best Macro Ideas list alongside the Long Bond (TLT), Munis (MUB), Extended Duration Treasuries (EDV), Utilities (XLU) and Gold (GLD)?


Heck, why not? Low Beta and Safe Yield is just one gargantuan bet that US growth continues to slow and that both Republicans and Democrats race to devalue the Dollar to try to show Americans the illusion of growth (asset inflation) again, isn’t it?


Of course it is, but it also runs its course when bad economic data becomes bad (again) for 90-100% of Americans who don’t get paid by Clinton Foundation speeches or owning their own apartment towers and oil wells.


What’s interesting is that the overall US Equity market traded deflationary yesterday, but REITS did not:


  1. US Dollar Up (small) on the day
  2. Oil (WTI) and Gold DOWN -2.9% and -2.3%, respectively
  3. Metals & Mining Equity ETF DOWN -7.8% on the day


So they jammed everyone back into what has not been working since the April 2016 lower-bubble-highs in the SP500 and chased US Retailers, Restaurants, etc. (you know, the stuff that does well when America is actually great, economically) and that was that.


But now what?


What happens when the entire equity market goes to Quad4 (#Deflation), including REITS? Well, I guess that might be my buying opportunity. Unlike Trump, I don’t love debt. But like many Americans (and Canadians), I love buying things on sale.


Our immediate-term Global Macro Risk Ranges are now:


UST 10yr Yield 1.71-1.82%

SPX 2030-2070
RUT 1096-1128


VIX 13.61-17.78
USD 92.49-94.65
Oil (WTI) 42.51-46.34

Gold 1255--1310


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Making America Weak Again - 05.10.16 EL Chart

USD, Japan and Singapore

Client Talking Points


Get the Dollar right and you’re still getting most things macro right – USD hammered #Reflation yesterday (Metals & Mining ETF -7.8% on the day!) and should signal immediate-term TRADE overbought on this bounce up at 94.65 USD Index.


Japan loves Up Dollar, Down Yen, the Nikkei was up +2.2% overnight and got U.S. Equity Futures excited, but we would fade that. The Nikkei will signal overbought on the bounce around 16,667 inasmuch as Yen will signal oversold vs. USD around 110.


Just in case someone is telling you global “demand” is why Japanese stocks bounced, after getting smoked China didn’t bounce overnight and Singapore was -0.9% (-22% from the April 2015 Global Equity #bubble high).


*Tune into The Macro Show with Hedgeye CEO Keith McCullough live in the studio with Demographer Neil Howe at 9:00AM ET - CLICK HERE

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

As our Growth, Inflation, Policy model is oscillating between tracking in quad 3 and 4 for the second quarter, we’re sticking to core positions that perform well when growth is slowing and the yield curve is flattening:

  • QUAD3: Growth Slowing, Inflation Accelerating
  • QUAD4: Growth Slowing, Inflation Decelerating


The model signals that growth is slowing either way, and we expect a continuation of bond market discounting late cycle, growth-slowing. An allocation to Long Bonds (TLT, ZROZ) and Utilities (XLU) keeps investors out of the way of guessing which way assets levered to inflation will move next. The yield spread 10s-2s moved this week like it is headed toward taking out YTD lows. To be clear, this is NOT an indication that growth is back.


McDonald's (MCD) reported 1Q16 earnings on April 22nd that beat consensus estimates. The quarter serves as continued proof that the comeback story is in full swing.


The big question is where MCD is headed in terms of their national value platform. They had the McPick 2 for $2, then 2 for $5, now they have shifted to the monopoly promotion. McDonalds regaining a consistent value message is key to their success, and they know this. Additionally, we have another two quarters of tailwind from All Day Breakfast before we begin to lap it.


McDonalds’ recovery has been nothing short of extraordinary and has been a great source of alpha for all of its holders. We continue to like the name on the LONG side given the strong fundamental turnaround and the style factors that we love, big cap, low beta and liquidity.


#GrowthSlowing remains our call here in Q2. How do we know growth is slowing (ex. being validated by Treasury bond market and XLU outperformance)?


We look at every relevant data series on a rate-of-change basis to analyze a sine curve. Taking a look at our analysis of Y/Y Non-Farm Payroll growth, a clear cyclical picture develops. Mainstream media and other sell-side sources who talk about guessing the sequential NFP number are pursuing a fool’s errand (a confidence interval that is very wide) in terms of positioning into a number. We call this “open the envelope risk."


Rather, constructing a sine curve of the rate of change in NFP growth gives us a clear visual that employment growth peaked (in Feb. 2015), and it’s not recapturing that growth rate in this cycle. So whatever the sequential number is M/M, we know where this series is headed. And, when considered with every other relevant data series, we have a clear empirical view on where the U.S. economy is positioned in the economic cycle.

Three for the Road


VIDEO (2mins) Expensive? ‘I Love Expensive’… via @hedgeye



With courage you will dare to take risks, have the strength to be compassionate, and the wisdom to be humble. Courage is the foundation of integrity.

Keshavan Nair


90% of Alaska’s general fund revenue comes from oil. 

The Macro Show with Keith McCullough Replay | May 10, 2016

CLICK HERE to access the associated slides.


An audio-only version of today's show is available here.