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Daily Market Data Dump: Friday

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

 

CLICK TO ENLARGE

 

Daily Market Data Dump: Friday - equity markets 5 20

 

Daily Market Data Dump: Friday - sector performance 5 20

 

Daily Market Data Dump: Friday - volume 5 20

 

Daily Market Data Dump: Friday - rates and spreads 5 20


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 sales@hedgeye.com.

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


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The Macro Show with Keith McCullough and Neil Howe Replay | May 20, 2016

CLICK HERE to access the associated slides.

 

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


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


Beating Negative

“Cash is an easy way to defeat negative interest rates.”

-Jim Rickards

 

I don’t know about you, but I value my hard earned cash, big time.

 

When you think about the implications of the following pattern: #GrowthSlowing => Currency Devaluation (dovish monetary policy response) => and falling and/or negative interest rates … it’s not that hard to understand why you’d be overweight cash, positive absolute return holdings, and safe yielding assets.

 

In a nutshell, that’s The Bull Case for being long what I am long personally: Cash, Long-term Bonds, Municipal Bonds, Extended Duration Bonds, Utilities, and Gold (+ Real Estate + Hedgeye Equity + NHL Equity, and private stuff!).

 

Beating Negative - Cheap cartoon 05.16.2016

 

Back to the Global Macro Grind

 

You see, I’m not in the business of marketing the perma bull on “but it’s cheap.” That mediocre man’s excuse almost always aligns with one very basic reality: being long and wrong something that isn’t going up. I want to own things that get more expensive.

 

I know this might be way out there in an environment where many consensus portfolios are having a hard time Beating Negative, but when I think about building my personal net wealth I think:

 

  1. Don’t lose the money I have
  2. Try to earn a positive risk-adjusted return on the money I invest

 

I know. The first thing a reasonably good storytelling high-net worth broker is going to say back to someone like me on something like that is “but inflation is rising, Keith – you need to put your cash to work.”

 

My reply: growth is slowing faster than inflation is rising. And, in the intermediate to long-term, GROWTH slowing at an accelerating rate, trumps (pardon the pun) inflation rising at a decelerating rate.

 

That’s why I have a 49% position in Cash and 91% of my max asset allocation in Fixed Income right now. On this week’s redo of “oh, rates are gonna rip” that’s blown Long Bond Bears up for almost a year now, I was able to buy more TLT (on red).

 

What’s the catalyst for rates to stop rising at the 6th lower-high since I’ve been making this call (July 2015)?

 

  1. #TheCycle (economic, profit, and credit cycles all slowing now, at the same time)
  2. #LateCycle US Consumption Growth slowing from its 1H 2015 cycle peak
  3. #LateCycle US Employment Growth slowing from its 1H 2015 peak

 

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.

 

Yes, we get it. Initial claims are still at a “low level” (hint: they ALWAYS are at the END of #TheCycle), but RATE of CHANGE is what matters most in macro. Most of our long-standing subscribers (thanking all of you, again, btw) get that.

 

Here are some more questions to consider when you try seeing the forest instead of the daily trading trees:

 

  1. Does #EmploymentSlowing data qualify as the “data” Yellen is dependent on?
  2. Do the 2 worst (April NFP and this week’s claims) employment reports SINCE the Fed Minutes matter?
  3. In addition to employment, isn’t the Fed more SP500 Dependent than they are concerned about inflation?

 

On SPY Dependence, I highly suggest you don’t forget that the recent Fed Minutes (that consensus macro tourists are hyperventilating about) came before the SP500 dropped for 4 straight weeks (intraday yesterday was a 4 week low).

 

Perversely, this is why I’m at my most “invested” position of 2016. Basically, because I am so bullish on #GrowthSlowing I believe the Fed is going to have to agree with Hedgeye on that (again) by the time they waive their magical market wand in June.

 

No, that doesn’t mean I am buying #LateCycle S&P Sectors like Consumer Discretionary, Tech, and Financials. It means I bought more of A) what’s been working and B) what worked yesterday. In a down tape, my “expensive” Utilities (XLU) closed +1.0% at +11.3% YTD.

 

On the Cash position, my friend Jim Rickards does a good job explaining why people like me still like it:

 

“There are many good, legitimate reasons to hold cash. You might have a cash business. You might want to have cash for emergencies. If you live where I do, on the East Coast, we’re vulnerable to hurricanes and nor’easters that can knock out power for days or weeks…” (The New Bull Case For Gold, pg 141)

 

Unlike many people I compete with in giving you risk managed advice, I have a cash business where I personally back the firm’s line of credit. I have to meet payroll for 70 employees, bi-monthly. And I will not get bailed out if I slow and/or fail.

 

Unlike running a central bank, that’s the real world of running a business. I deal with cash-in vs. cash-out. And if I don’t beat a negative return on my invested capital, I will go away.

 

Our immediate-term Global Macro Risk Ranges are now:

 

UST 10yr Yield 1.68-1.88%

SPX 2029-2058
RUT 1082-1110
USD 93.36-95.65
YEN 107.77-110.62
Oil (WTI) 44.82-50.43

Gold 1

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Beating Negative - 05.20.16 Chart


Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.32%
  • SHORT SIGNALS 78.48%
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