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McCullough: The Most Asymmetric US Corporate Profit Risk (Ever)

 

In this brief excerpt from The Macro Show this morning, Hedgeye CEO Keith McCullough reviews the “Fantasy Island” earnings risk blinding many investors and why second and third quarter earnings for most sectors will be “awful.”

 

Subscribe to The Macro Show today for access to this and all other episodes. 

 

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An Update On The Bond Market, #GrowthSlowing & Yellen's Favorite Indicator

Takeaway: The yield on the 10-yr Treasury crashed on Friday's jobs bomb. Plus, an update on Yellen's favorite labor market indicator doesn't look good

An Update On The Bond Market, #GrowthSlowing & Yellen's Favorite Indicator - yellen yoyo

 

Here's analysis via Hedgeye CEO Keith McCullough in a note sent to subscribers earlier this morning: 

 

"The 10-yr Treasury yield crashed on Friday's jobs bomb (that was in line with the change in Janet’s favorite labor market indicator index, more on that below) 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)"

 

 

More on Yellen's favorite indicator...

 

The "Labor Market Conditions Index" contracted for the fifth straight month to down -4.8% in May. Meanwhile, the prior month was downwardly revised from -0.9% to -3.4%.

 

In other words, not good. 

 

An Update On The Bond Market, #GrowthSlowing & Yellen's Favorite Indicator - yellen s favorite

 

(For more on how the Fed could interpret all of this, check out "5 Charts: How Last Week's #JobsBomb Is Impacting Global Markets.")


5 Charts: How Last Week's #JobsBomb Is Impacting Global Markets

Takeaway: Fed head Janet Yellen could crush markets this afternoon if she doesn't pivot back to dovish in her speech at 12:30pm.

5 Charts: How Last Week's #JobsBomb Is Impacting Global Markets - rate hike cartoon 11.17.2015

 

The latest macro market read through on Friday's #JobsBomb goes like this:

Dovish Fed = Down Dollar = Reflation Up

 

In short, imagine what would have happened to the reflation trade if the jobs report wasn’t a bomb…

 

Here's analysis via Hedgeye CEO Keith McCullough in a note sent to subscribers earlier this morning: 

 

"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?"

 

 

To sum up the post #JobsBomb market reaction...

 

 

Take a look at the ramp in gold...

 

 

Meanwhile, in commodity-driven markets abroad...

 

Australian equities popped.

 

 

Australian equities are just one example of the many markets tethered to reflation that are up this morning. Similarly, Oil jumped another +1.1% on the latest thinking that Dovish Fed = Down Dollar. On that, Russian stocks are up +1.7%.

 

Over in Japan, central planners can't stop the bleeding.

 

In the past week, Down Dollar = Up Yen = You guessed it... Down Nikkei (it's still crashing).

 

 

Speaking of crashing... 

 

The same story rippling through Japan is handicapping Italian equities. (Down Dollar = Up Euro = Down FTSE MIB)

 

So where do we go from here?

 

For those of you keeping score, here's the past seven months of frenetic Fed pivots:

 

  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 the market is expecting the Fed to go dovish but what if Yellen & Co. don't deliver? A final note on Fed policy from Hedgeye CEO Keith McCullough in this morning's Early Look:

 

"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."

 

In other words, heads up. It could get ugly.


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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

 

CLICK TO ENLARGE

 

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


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


REPLAY! This Week On HedgeyeTV

Our deep bench of analysts take to HedgeyeTV every weekday to update subscribers on Hedgeye's high conviction stock ideas and evolving macro trends. Whether it's on The Macro ShowReal-Time Alerts Live or other exclusive live events, HedgeyeTV is always chock full of insight.

 

Below is a taste of the most recent week in HedgeyeTV. (Like what you see? Click here to subscribe for free to our YouTube channel.)

 

Enjoy!   

 

1. Benn Steil: Mercurial Central Bankers Screwing Markets (6/4/2016)

 

  

In this edition of “Real Conversations,” Benn Steil, director of international economics at the Council on Foreign Relations and author of "The Battle of Bretton Woods" discusses the significant challenges facing investors as global central bankers continue to manipulate and flummox markets with Hedgeye CEO Keith McCullough.  “This environment has never been more complicated for investors," explains Dr. Steil. “They can no longer count on what monetary policy makers are telling them.”

 

2. Does a Third-Party Candidate Derail Trump? (6/3/2016)

 

 

In this edition of Washington To Wall Street, Hedgeye Potomac Chief Political Strategist JT Taylor and Director of Research Daryl Jones discuss what a third-party Libertarian presidential bid may mean for Donald Trump’s Oval Office aspirations. 

 

3. What The Media Missed At Today’s OPEC Meeting (6/2/2016)

 

 

In this excerpt from The Macro Show this morning, Hedgeye Potomac Senior Energy analyst Joe McMonigle called in from the OPEC meeting in Vienna to discuss why Saudi Arabia is deeply concerned with $50 oil.

 

4. McCullough: The Call Is Clear, Raise Cash (5/31/2016)

 

 

In this brief excerpt from The Macro Show this morning, Hedgeye CEO Keith McCullough issues a stern directive to investors and explains the reasons why.


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 80.64%
  • SHORT SIGNALS 78.61%
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