CLIENT TALKING POINTS
S&P 500
Will 1 big up day give U.S. stocks their 1st real up week (into month-end) in the last 6 weeks? Maybe we should all buy/cover high again so that we can sell 50 handles lower! Inasmuch as our signal was clear to buy/cover around 2030-2040, it’s crystal clear to start selling again in the 2080-2090 range as Equity Volatility makes yet another higher-low.
UST 10YR
Unfortunately, the bond market isn’t buying into the hope that GDP is +2.5% here in Q2 (we’re still below 1%) – at 1.86% this morning the 10YR Yield is signaling at 1.68% is still very much in play ahead of next week’s #EmploymentSlowing report.
GOLD
Gold down to +15% year-to-date – what a disaster that is! If you haven’t owned it all year, here’s another BUY signal. It’s been a great way to play #GrowthSlowing and we have Durable Goods, GDP, and Labor all being reported in the next week.
*Tune into The Macro Show with Hedgeye CEO Keith McCullough at 9:00AM ET - CLICK HERE.
TOP LONG IDEAS
GLD
When Janet does have to acknowledge the deterioration in U.S. growth, we expect the policy shift to be dollar bearish on the margin. And, to the contrary, if the Fed RAISES RATES (June) into this slow-down, they’ll be the catalyst for DEFLATION (down yields) again anyway. And there’s nothing Gold (GLD) likes more than a falling dollar and falling interest rates which is why we added it to the long-side of Investing Ideas this week. Remember, this is the same week various Fed members were in public calling for a rate hike with the worst jobless claims print since 2012. #GoodLuck.
MCD
McDonald's (MCD) continues to evolve. The company's latest step is testing never frozen burgers at 14 units in the Dallas, TX area. This initiative could give them the ability to compete with better burger concepts such as Shake Shack, In-N-Out and Five Guys.
Meanwhile, there has been chatter about the lack of identity for their value platform in 2Q16. MCD is truly still in the testing phase as to what their national value message will be. We can appreciate the fact that they are testing multiple formats before fully committing.
In the meantime, the tailwind from all-day breakfast will continue to propel growth going forward, until lapping this initiative in 4Q16. We continue to favor MCD as one of the best LONGs in the market right now, due to actual growth and style factors that are friendly in volatile markets.
TLT
If you haven’t yet, you got another chance to buy long-term Treasuries at lower highs this week. If you’re already long of Long Bonds (TLT, ZROZ), stick with it. None of the relevant data released this past week suggests that growth could inflect and trend positive:
- Thursday’s Jobless Claims Report was the worst print, in Y/Y rate of change terms, since 2012, and it was the fourth consecutive week of increasing jobless claims
- Industrial Production declined -1.1% Y/Y for April, marking the 8th consecutive month of Y/Y contraction: #IndustrialRecession
Tying together a continued deceleration in growth with policy expectations, the most important callout is that our expectation for growth in Q2 is well below consensus and Fed expectations (which have been horribly inaccurate).
Asset Allocation
| CASH | US EQUITIES | INTL EQUITIES | COMMODITIES | FIXED INCOME | INTL CURRENCIES | |
|---|---|---|---|---|---|---|
| 5/24/16 | 52% | 6% | 0% | 8% | 28% | 6% |
| 5/25/16 | 58% | 2% | 0% | 10% | 28% | 2% |
Asset Allocation as a % of Max Preferred Exposure
| CASH | US EQUITIES | INTL EQUITIES | COMMODITIES | FIXED INCOME | INTL CURRENCIES | |
|---|---|---|---|---|---|---|
| 5/24/16 | 52% | 18% | 0% | 24% | 85% | 18% |
| 5/25/16 | 58% | 6% | 0% | 30% | 85% | 6% |
THREE FOR THE ROAD
TWEET OF THE DAY
Why Hedgeye's Howard Penney Is Still Bearish On Shake Shack https://app.hedgeye.com/insights/51167-unlocked-why-hedgeye-s-howard-penney-is-still-short-shake-shack… @KeithMcCullough $SHAK
@Hedgeye
QUOTE OF THE DAY
Life is really simple, but we insist on making it complicated.
Confucius
STAT OF THE DAY
This past 2015-16 season Broadway had 13,317,980 visitors, up 1.6% over the previous season.
