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Daily Market Data Dump: Monday

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




Daily Market Data Dump: Monday - equity markets 6 6


Daily Market Data Dump: Monday - sector 6 6


Daily Market Data Dump: Monday - volume 6 6


Daily Market Data Dump: Monday - rates and spreads 6 6


Daily Market Data Dump: Monday - currencies 6 6

Jobs Report Bomb

Client Talking Points


They eviscerated the Dollar on the jobs bomb (and ISM Services slowing print of 52.9 for May) taking USD down -1.6% on the day (massive 1-day move) and ramping up everything that is inversely correlated to it (which, at this point, from Gold to Russian and Australian stocks, are a lot of things) – can they do this daily?


Yield crashed on the news (that was in line with the change in Janet’s favorite labor market indicator index, btw) to 1.71%, which implies that A) the data is beating the Fed’s forecasters, big time, YTD and B) if she hikes into this, she’s going to implode all of the illusions of real growth (i.e. the aforementioned reflation trades).


Get #TheCycle right and you’ve had your sector styles right – Utilities up huge on Friday +1.6% to +15.7% YTD – Financials down huge -1.4% to -1.3% YTD. Getting whipped around trying to day trade this is as easy as staying with the fundamental #GrowthSlowing TREND.

Asset Allocation

6/5/16 80% 0% 0% 4% 8% 8%
6/6/16 76% 0% 0% 6% 12% 6%

Asset Allocation as a % of Max Preferred Exposure

6/5/16 80% 0% 0% 12% 24% 24%
6/6/16 76% 0% 0% 18% 36% 18%
The maximum preferred exposure for cash is 100%. The maximum preferred exposure for each of the other assets classes is 33%.

Top Long Ideas

Company Ticker Sector Duration

McDonald's (MCD) is testing fresh beef in 14 Dallas-area restaurants in an attempt to become a modern progressive burger company and better compete with smaller, premium chains. Part of the reason they haven’t done this in the past is because there hasn’t been enough supply of fresh beef for their demand.


The initiative will expand further to more markets over the course of the year to test both consumer perception and their supply chains ability. This could be a big move for MCD that will undoubtedly improve food quality and consumer perception of the company.


Also in the news over the last couple of weeks is MCD’s plan to move its HQ from Oak Brook to downtown Chicago. Although not important from an operational perspective immediately, it will help the company attract and retain top talent which will be beneficial overtime. MCD remains one of our top ideas in the Restaurant space.


Friday’s jobs report represented a complete shift to any renewed expectations of a June/July hike. The yield spread ended the week pinned near the bottom of the cycle low at 92 basis points (10yr-2yr yield %). And, looking at real-time rate hike expectations, the bid-yield of December 2016 Federal Funds Futures Contracts dipped 8 basis points day-over-day, implying the market’s expectations for the first rate hike is now in 2017!


That was the commentary that closed out a deflationary month of May – USD +3.1% with Gold -6.3% and the long end of the Treasury curve and the S&P roughly flat. Fast forward a week. Gold, the Treasury market, and Federal Fund futures don’t buy the hawkish rhetoric for a second.


We’ve shown our chart of the Y/Y% change in Non-Farm Payrolls numerous times, so Friday’s Jobs report was no surprise to us. Consumption and labor market strength are classic late-cycle indicators, but eventually these indicators peak and roll-over in rate-of change terms. Here's the Jobs Report breakdown:

  • Non-Farm payroll additions totaled +38K in May vs. +160K est. and +160K prior. While the number was a bomb for those who follow the month-to-month sequential change (which is useless), we expected the weakness. To be clear, history paints a very clear picture. NFP additions peaked in Q1 of 2015 and have since rolled over. It’s part of #TheCycle

Three for the Road


That explained the entire market move on Friday Jobs Bomb = Dollar Down -1.6% --> Rates crashed, Utilities and Gold ripped, Financials fell



You have to learn the rules of the game.  And then you have to play better than anyone else.

   -Albert Einstein


Greg Maddux had a ERA of 1.56 in 1994 while pitching 202 innings for the Atlanta Braves.

The Macro Show Replay | June 6, 2016


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

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CHART OF THE DAY: Yikes! A Look At How Consensus Is Positioned

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.


"... Look at last week’s CFTC futures and options net positioning:

  1. SP500 (Index + E-mini) +56,081 net LONG contracts = +2.16x (leaning bullish on a 1yr z-score)
  2. 10YR Treasury -159,930 net SHORT contracts = -2.66x (leaning bearish on a 1yr z-score)

Really? It’s one thing for The Bull on bonds to book some gains when Janet tells him she’s gonna hike (until she sees the data she hasn’t forecasted)… but to buy SPY and short TLT on that? I guess that’s why performance out there is not good."


CHART OF THE DAY: Yikes! A Look At How Consensus Is Positioned - 06.06.16 EL Chart

Janet's Jobs Beliefs

“For superforecasters, beliefs are hypotheses to be tested, not treasures to be guarded.”

-Phil Tetlock


After this morning’s Change In Labor Market Conditions report (i.e. Janet Yellen’s favorite labor market leading indicator, which is set to slow for the 5th straight month), will Janet be dovish or hawkish? Is she really “data dependent”?


For those of you who get the game we are in, the only thing that matters to macro markets right now is which way the Federal Reserve pivots from here. Post Friday’s Jobs Bomb, not going back to dovish during Yellen’s 12:30PM speech could crush markets.


Crush? How about confuse? Imagine the jobs report wasn’t a bomb on Friday? What would the things that held the “market” together (Commodities, Gold, Utilities, etc.) have done then? What if Yellen raises rates, for the 2nd time in 6 months into the slowdown?


Janet's Jobs Beliefs - Hawk or dove cartoon 05.31.2016


Back to the Global Macro Grind


We all have problems in life, but I guess my main one is that I actually believed Janet when she said she’d “probably raise rates” in June or July. So did macro markets. But she’ll be the one with a much bigger equity market problems if she doesn’t pivot again.


Remember the sequencing of both #TheCycle and the Fed’s response to it:


  1. HAWKISH (December) raising rates in front of a horrible Q1 slow-down (economic and profit cycle)
  2. DOVISH (March/April) trying to undo the hikes with rhetoric, devaluing Dollars to reflate asset prices
  3. HAWKISH (May) post the stock market bounce and Atlanta Fed GDP Tracker rising


Now DOVISH (June) post the “belief” that labor market conditions should be improving? Oh boy is this getting to be a lot of fun.


If you live in the land of the “but the market was flat” last week,  you missed another major move within the market. Yes, for those of you who want to earn premium fees and take market share, you have to beat the market.


With the SP500 rallying into Friday’s close to 0.0% on the week, here’s what really moved last week:


  1. US DOLLAR hammered -1.6% on Friday to close down for the 1st week in 5 (but -4.7% YTD)
  2. COMMODITIY REFLATION (CRB Index) +1.4% on the week to +7.1% YTD
  3. GOLD ripped on Friday to close up another +2.4% on the week to a league leading +17.3% YTD
  4. UTILITIES ramped another +1.4% on the jobs print, closing the week up another +2.6% = +15.7% YTD
  5. FINANCIALS got pounded by the data, closing -1.4% on Friday (-1.3% on the wk) to -1.3% YTD


No, this is not a “growth investor’s” market. This is a #LateCycle consumption and employment slowing market that is paying people who are long LOW BETA (up another +1.6% on the week to +9.1% YTD) and safe yields.


KM, did you mention consumption slowing? Am I going to be the only one who writes about the YTD low ISM Services print of 52.9 (MAY) vs. 55.7 (APR) this morning? Or should I just hush it and keep shorting US Retailers that are still in crash mode?


Back to the only other economist/strategist I know who has written daily about late cycle consumer and jobs data slowing for the last 6 months – his (or her) name is Mr/Mrs Bond Market:


  1. US 2YR Treasury Yield smoked for a -14 basis point drop last week to -28 basis points YTD (0.77%)
  2. US 10YR Treasury Yield spanked for a -15 basis point drop last week to -57 bps YTD (1.71%)
  3. YIELD SPREAD (10yr minus 2yr) down another beep to YTD lows of 93 basis points wide


So, I agree, you have to be long stocks – but mainly the ones that aren’t showing sales/revenues slowing and/or the ones that look like bonds. Because this raging bull market in the Long Bond is very much intact, no matter what Janet’s beliefs about jobs are.


What’s awesome about being The Long Bond Bull (interrupted every other month by Federal Reserve short-term pivots to hawkish), is that every time people get a whiff of Bond Yields going higher, they dog-pile the short-side of my long book!


Look at last week’s CFTC futures and options net positioning:


  1. SP500 (Index + E-mini) +56,081 net LONG contracts = +2.16x (leaning bullish on a 1yr z-score)
  2. 10YR Treasury -159,930 net SHORT contracts = -2.66x (leaning bearish on a 1yr z-score)


Really? It’s one thing for The Bull on bonds to book some gains when Janet tells him she’s gonna hike (until she sees the data she hasn’t forecasted)… but to buy SPY and short TLT on that? I guess that’s why performance out there is not good.


No matter what your beliefs about where we’ve been or where we are going during #TheCycle, it’s crystal clear at this point that US economic growth peaked in Q2 of 2015.


Hedgeye’s hypothesis on that has been tested and tried, in real P&L terms, many times since July of last year. It’s not a position I’ve treasured. It’s an analytical position I’m proud to say we stuck with in the face of establishment economics adversity.


Our immediate-term Global Macro Risk Ranges are now:


UST 10yr Yield 1.64-1.81%

SPX 2055-2120
RUT 1110-1181


VIX 12.62-16.89
USD 93.25-96.01

Gold 1


Best of luck out there this week,



Keith R. McCullough
Chief Executive Officer


Janet's Jobs Beliefs - 06.06.16 EL Chart

JT TAYLOR: Capital Brief


JT TAYLOR:  Capital Brief - JT   Potomac banner 2


CLINTON'S CONUNDRUM: Hillary Clinton needs less than 30 delegates to secure the nomination – a sure bet after looking to amass a large chunk of delegates in tomorrow’s primaries in NJ, CA, MT, NJ, NM, ND, and SD. All in, CA remains the biggest prize as Clinton and Bernie Sanders remain neck and neck. If she’s able to edge it out, she’ll hand Sanders a lethal blow – but then what’s in it for Sanders? Sure – he’s corralled and electrified the masses, but his future steps are immensely important. Clinton’s lead in the general election polls over Donald Trump remains slim and when Sanders decides to hang it up – expect Clinton’s numbers to climb – but she’ll need his help getting there.


TRUSTING TRUMP?: The Donald Trump trust factor may be the biggest issue facing the Republican party this year and though many Republican leaders have taken their seats aboard the Trump train they know there will be many opportunities for a derailment or two. Senior Republicans are calling Trump’s recent criticism of a Hispanic judge the last straw after promising to make an effort to “lighten” his choice of words when speaking of minorities as Goldwater flashbacks keep them up at nights. If Republicans believe they have a fighting chance this November,  they’ll need to mitigate their trust in Trump to do the right thing – and fast.


PROCRASTINATION NATION: With summer recess nearing and an unfinished budget still looming, Congress returns this week to a full plate. Zika funding has been sitting before Congress for more than three months – House and Senate bills are yet to combine due to political reasons. Puerto Rico is still sinking but sees a glimmer of hope as legislation will hit the Rules Committee later this week, followed by a vote in the House later in the week. With this hanging over Congress’ head, remember – it’s also Appropriations season and we’ve only got five weeks until Congress skips town for a loonnnngg summer recess.


BERNIE BANGS THE DRUM: Although Bernie Sanders will not be able to nab the Democratic presidential nomination, he’s created quite an iconic image that he could certainly leverage when he returns to the legislative arena. Sanders has long been known for his opposition to bipartisan agreements, but without public support, his tiffs remained meaningless. Look for Sanders to ruffle feathers on the Puerto Rico debt deal and other landmark bills in the future.


REMEMBER RUBIO?: Once revered as a Republican “golden boy,” Marco Rubio finds himself at a crossroads about his future. His fall from grace during the presidential primary was relatively quick and unexpected, and his announced retirement from the Senate premature.  If Republicans want to retain his FL seat - and the Senate - they’re going to need to do a better job of convincing him to stay .


VIETNAM, TPP, AND GEOSTRATEGY IN ASIA: Our Geopolitical Analyst LTG Dan Christman offered his insights into Vietnam, TPP, and Geostrategy in Asia “Vietnam, TPP, and Geostrategy in Asia


PENTAGON CONFIRMS IT STILL INTENDS TO BUY 2,443 JOINT STRIKE FIGHTERS: Check out our Senior Defense Policy Advisor LtGen. Emo Gardner’s insight on the Pentagon’s confirmation to Congress that it intends to buy 2,443 F-35s through 2038 “LMT, UTX, NOC, BAE, TXT: Pentagon Confirms It Still Intends to Buy 2,443 Joint Strike Fighters


BREXIT: SHOULD I STAY OR SHOULD I GO?: Join us for a call this Wednesday with Alexander Nicoll, a consulting member of the UK-based International Institute for Strategic Studies, as he discusses the events leading up to the UK vote and what the outcome of the vote spells for the UK and EU. Please email us for dial-in information.

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