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Fed-Induced Hyperventilation: A Buying Opportunity

Takeaway: Last week's hawkish Fed minutes provided a nice entry point for investors looking to get long the Long Bond.

Fed-Induced Hyperventilation: A Buying Opportunity - Yellen cartoon 04.06.2016 

 

The anxiety in macro markets is palpable.

 

Following last week's Fed minutes, Long Bonds backed up a bit as the hawkish commentary filtered into Treasuries. Meanwhile, the cabal of pro-rate hike regional Fed heads made the media rounds talking up two, even three, rate rises this year.

 

Filtering out the noise, the reaction actually presented investors with a unique opportunity, Hedgeye CEO Keith McCullough writes in a note sent to subscribers this morning.

 

"Last week’s hyperventilation about the Fed’s “minutes” (from April) turned out to be yet another buying opportunity in everything Long Bond, Utes, etc. – with the 10yr at 1.82% this morning, all tweets are on Yellen who speaks at 1:15 p.m. EST. Remember, she is a labor economist – that makes next week’s jobs report one of the most important of 2016."

 

 

While we're discussing those talkative Fed hawks, we'd also add a brief note. Here's an interesting chart via Deutsche Bank. Apparently, the more likely a Fed economist is to appear on CNBC, the more likely they are to have a delusional view of the U.S. economy.

 

Who'd have thought?

 


CHART OF THE DAY: A Look At Yellen's Favorite Economic Indicator

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.

 

"... As you can see in today’s Chart of The Day, Janet’s favorite “indicator” is one she calls her “Change In Labor Market Conditions Index.” After being green for, drumroll, #TheCycle… it started to go red (like it always does)… as the US economic cycle had already peaked and rolled.

 

Since this data series goes back to the 1970s, you can see that the probable outcome (from here) is for the 3 red bars just reported to go really red sometime soon. Does Janet want to be the catalyst in expediting that? When it’s really red, she has to be dovish."

 

CHART OF THE DAY: A Look At Yellen's Favorite Economic Indicator - 05.27.16 chart


Cartoon of the Day: Piggy Banks

Cartoon of the Day: Piggy Banks - Financials cartoon May 2016

 

Our Macro team's favorite sector short, Financials (XLF), is the second worst performing S&P sector year-to-date at down -0.7%.


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Capital Brief: GOP Tiptoeing Towards Trump ... & DNC Infighting

Takeaway: Ryan Tip Toeing Toward Trump; Dems Dropping Debbie; Almost There

Capital Brief: GOP Tiptoeing Towards Trump ... & DNC Infighting - capital brief

 

Editor's Note: Below is a brief excerpt from Hedgeye Potomac Chief Political Strategist JT Taylor's Capital Brief sent to institutional clients each morning. For more information on how you can access our institutional research please email sales@hedgeye.com.

TIP TOEING TOWARDS TRUMP

 

Capital Brief: GOP Tiptoeing Towards Trump ... & DNC Infighting - trump 44

 

Looks like Speaker Paul Ryan will take his time deciding when to endorse Donald Trump despite rumors that he was on the verge this week. Ryan and Trump remain deeply divided over major policy issues, particularly free trade and immigration, but Ryan allies feel the longer he holds out, the more damage he may inflict on the party’s chances this fall.

PLOTTING THE PLATFORM 

 

Republicans have chosen to name three conservative members to lead the committee that will decide this summer’s convention platform. Moves were made after Trump mentioned he’d like to see changes made to the agenda that has essentially stayed the same since the days of Ronald Reagan. Look for issues that have united Republicans in the past to be highlighted; a strong party platform is important for unity going into July as well as corralling corporate convention sponsors and major donors already agitated by Trump’s views and commentary.

DEMS DROPPING DEBBIE?

 

Capital Brief: GOP Tiptoeing Towards Trump ... & DNC Infighting - bernie sanders 44

 

High level Democrats are discussing whether or not Rep. Debbie Wasserman Shultz (FL) should step down as DNC chairwoman before the big blue party in July. Democrats feel that Shultz has been too disruptive in uniting the party and whether her continued and veiled support for Hillary Clinton muddies the water for future discussions and negotiations. Adding to that, her most recent squabble with Bernie Sanders (we lost count) over rigging the system only adds fuel to the fire.

ALMOST THERE

For those of you keeping score...with his win in Washington State, Trump finds himself just a handful of delegates shy of the Republican nomination. He now holds 1,229 of the 1,237 delegates needed to clinch.


A Closer Look At Today's Durable Goods Data

Takeaway: Headline Durable Goods orders jumped +3.4% MoM and improved to +1.9% YoY but the internals were less sanguine.

A Closer Look At Today's Durable Goods Data - economic indicators cartoon 02.24.2016

 

Hiding in plain sight behind Wall Street's fallacious "all is good" narrative is U.S. economic reality. A deep dive into today's durable goods data confirms our dour outlook for U.S. growth.

 

Below is analysis from Hedgeye U.S. Macro analyst Christian Drake in a note sent to subscribers earlier this morning:

 

"Headline Durable Goods orders jumped +3.4% MoM and improved to +1.9% YoY but the internals were less sanguine with the bulk of the gain stemming from the +65% MoM increase in commercial aircraft & parts. Durables ex-Defense and Aircraft, which is most aligned with what actual households buy, rose +0.6% MoM but remains down -0.4% YoY.  

 

Meanwhile, Core Capital Goods fell MoM for a 3rd consecutive month, dropping -0.8 sequentially and holding at -5% YoY -  continuing the epic run of declining capital spending with negative year-over-year growth in 15 of the last 16 months."   

 

Here's the detailed breakdown in the chart below

 

Click image to enlarge

 

A Closer Look At Today's Durable Goods Data - durable goods 5 26

 

Next up Updates on GDP and corporate profits.

 

 


'We're In A Position Of Extreme Vulnerability' says Neil Howe

Takeaway: America is in a "position of extreme vulnerability."

Conventional wisdom suggests economic and related tensions wrought by The Great Recession are in the rearview. All is good. Sunny skies for miles.

 

Not so says Hedgeye Managing Director and Demography Sector Head Neil Howe, who kicked off John Mauldin's Strategic Investment Conference in Dallas with a bang. "Our first presentation from Neil Howe on the First Turning was the perfect set-up... and truly was a show stopper," Mauldin wrote following Howe's presentation.

 

In the wide-ranging interview below following his speech, Howe explains why America is in a "position of extreme vulnerability" based on "the mood of the electorate" and "widening generational inequity." He discusses everything from the rise of polarizing political figures like Donald Trump and Bernie Sanders to the Fed's "destructive monetary policy."  

Click to watch


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