The Great Debate: #Reflation or #GrowthSlowing

The Great Debate: #Reflation or #GrowthSlowing - growth  cartoon 04.05.2016


Are you long #Reflation or #GrowthSlowing? 


That's the key question investors need to ask themselves going forward. To be clear, Hedgeye CEO Keith McCullough has some #Reflation signals in RTA over a trade duration (3 weeks or less) but we're The Bulls on #GrowthSlowing.


Here's analysis via McCullough in a note sent to subscribers earlier this morning. 


"In terms of both Asset Allocation and longs vs. shorts in Real-Time Alerts, this as long as I’ve been all year. To be clear, that means I’m down to 49% Cash! And that’s mainly because the USD is signaling immediate-term TRADE overbought, so many of the #Reflation trades signaled immediate-term TRADE oversold this week (i.e. buy/cover signals)."



Like Russia...



Or commodity-linked Australia...



As McCullough wrote in today's Early Look, "growth is slowing faster than inflation is rising. And, in the intermediate to long-term, growth slowing at an accelerating rate, trumps inflation rising at a decelerating rate."


Here's how to trade that via McCullough... 


"Dollar Down, Rates Down is the other big reason for the setup (i.e. I can be long the Long Bond, Utes, Gold, etc. in that scenario); Gold’s immediate-term risk range = $1250-1280, so not a ton of upside from here but I’ll take what I can get."



Stick with your #GrowthSlowing positions here.

See Jobless Claims? The Countdown To Recession Begins

Takeaway: Growth in the number of people filing initial unemployment claims isn't the growth you're looking for.

Editor's Note: Below is an excerpt from an institutional research note written by Financials analysts Josh Steiner. To access our institutional research email

See Jobless Claims? The Countdown To Recession Begins - The Cycle cartoon 03.04.2016

WE HAVE GROWTH (Depending on how you look at it)


The latest NSA initial claims data grew on a Y/Y basis for the first time in a long time. While the increase was small at +2%, it's the first time since 2012 this has happened. Prior to 2012, you'd have to go back to 2007 to find the last time claims were rising. Initial claims are still at a low level in absolute terms, but rate of change matters. We wrote about this dynamic in detail back in February 2015 ("Initial Claims: Cognitive Dissonance & Mice"). 


Alternatively, in the last three cycles, claims have stayed below 330k for 24, 45, and 31 months before recession set in (33 months, on average). The current sub-330k run is now in its 27th month. That puts us 3 months past the minimum, 6 months from the 33-month average, and 18 months shy of the 1990s record-setting expansion. 


Click to enlarge

See Jobless Claims? The Countdown To Recession Begins - initial claims 5 19

CHART OF THE DAY: Digging Into The Worst Jobless Claims Report Since 2012

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.


"... On that last point (#EmploymentSlowing), while the Old Wall was staring at the trees yesterday (‘omg, omg – what did Dudley say’), we were the only firm to write a research note contextualizing the worst US Jobless Claims report since 2012.


At +2% year-over-year, the latest non-seasonally adjusted (NSA) jobless claims report was the first year-over-year acceleration to positive since 2012. Prior to 2012, you’d have to go back to 2007 to find the last time claims were rising."


CHART OF THE DAY: Digging Into The Worst Jobless Claims Report Since 2012  - 05.20.16 Chart

Early Look

daily macro intelligence

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: Whole Lotta Bull

Cartoon of the Day: Whole Lotta Bull - Usidedown bull 05.19.2016


The S&P 500 is flat year-to-date. That explains a lot. "There's so much whining out there... Stop it. And start winning," Hedgeye CEO Keith McCullough wrote today. In other words, get long our favorite Macro Ideas... Long Bonds (TLT), Utilities (XLU), and Gold (GLD).

Dear Fed, It's Better To Remain Silent and Be Thought a Fool...

Takeaway: America's unelected central planners look more and more manic with each passing day.

Dear Fed, It's Better To Remain Silent and Be Thought a Fool... - Yellen data dependent cartoon 11.18.2015


"The 2nd worst thing to happen to capitalism (behind ZIRP and QE) is the Fed's decision to constantly think out loud," Hedgeye Senior Macro analyst Darius Dale wrote earlier today.


It's been shocking to watch the market confusion as the Fed pivots between hawkish and dovish (sometimes in just a matter of days).


The latest from the Fed, between the meeting minutes yesterday and the parade of regional Fed heads today, is that a June hike is a "live possibility." Meanwhile, the market doesn't know what to make of the Fed's "thinking out loud." Below is the market-implied rate hike probability yesterday at 1:44pm ET, right before the Fed minutes were released.


Dear Fed, It's Better To Remain Silent and Be Thought a Fool... - rate hike 5 18 1.44


Now look at the probability today...


Dear Fed, It's Better To Remain Silent and Be Thought a Fool... - rate hike prob 5 19


In other words, the probability of a June rate hike doubled in less than 24 hours. Despite all the hawkish tough talk, the market is reluctant to accept the flippant Fed's words as gospel. The current probability of a rate hike is just 28%. 


Just to underscore how truly manic these market reactions have been to each and every word out of the Fed, here's the implied rate hike probability at the start of the year, on January 1. Notice the near certitude of rate hikes throughout 2016.


Clearly, the Fed has a credibility problem.


Dear Fed, It's Better To Remain Silent and Be Thought a Fool... - rate hike 1 1


If all of this leaves you a bit befuddled, here's what you need to know via Hedgeye CEO Keith McCullough in today's Early Look:


"If the Fed hikes in June into the face of this economic slowdown it will perpetuate deflation (down yields)."


That's why we're reiterating our big macro call...

Long the Long Bond (TLT).

McCullough: History Is An Important Guide To Mr. Market


In this brief excerpt from The Macro Show earlier today, Hedgeye CEO Keith McCullough responds to a “fantastic question” about the correlation between the U.S. dollar and Treasuries now that the dollar is getting stronger. 


Subscribe to The Macro Show today for access to this and all other episodes. 


Subscribe to Hedgeye on YouTube for all of our free video content.


Enter your email address to receive our newsletter of 5 trending market topics. VIEW SAMPLE

By joining our email marketing list you agree to receive marketing emails from Hedgeye. You may unsubscribe at any time by clicking the unsubscribe link in one of the emails.