In today's Early Look, Hedgeye CEO Keith McCullough explained why investors should be selling long exposure to Utilities (XLU):
"I didn’t think the Fed would be stubborn enough to stay with a pseudo “mid-cycle” economic view, I didn’t think they’d pivot from hawkish (DEC) to dovish (MAR-APR) back to hawkish (MAY)… but I guess I thought wrong (I thought she was data dependent!).
That’s why I sent out SELL signals (i.e. take down exposures) to my favorite intermediate to long-term LONG ideas after listening to Janet on Friday. After having such a great start to the year by simply staying with #TheCycle call, why would I just let the Fed making a policy mistake eat into my family’s hard earned absolute returns?
In the end, I think the Fed will be proven wrong (again) and the curve will continue to flatten as the rate of change in US economic growth slows in Q2 and Q3. But in between now and the end, I have to deal with the risk these bad Fed estimates impose on my portfolio’s preferred asset allocation. So this is what the Hedgeye Asset Allocation Model’s key moves look like, in context:
- CASH going to 77% (from 49% when US Equities hit their May lows)
- Taking US Equities from 6% back to 0% (like I did in late DEC)
- Taking Fixed Income 31% to 11% (i.e. from 91% of my max exposure to 33%)"
