FYI: The Yellen Fed isn't "data dependent." It's S&P 500 dependent.
In this brief discussion, Hedgeye U.S. Macro analyst Christian Drake analyzes the trend in consumer credit growth, which has been supporting consumption in the face of slowing income growth.
Takeaway: Hillary the Historic; Bernie's California Dream; Gary's Gains
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 email@example.com.
Hillary Clinton has secured enough delegates to claim the Democratic presidential nomination and is poised to become the first female candidate to lead a major party to the White House in U.S. history. A handful of super delegates pushed Clinton over the finish line of 2,383 ahead of a jampacked day full of primaries. Clinton will call for the Democrats to unify behind her candidacy as primary season comes to an end today – and she and party leaders expect Bernie Sanders to follow suit.
To pad her lead, look for her to pick up a sizeable chunk of delegates in the six states voting today; her campaign hopes that being declared the presumptive nominee 24 hours before CA votes doesn’t suppress turnout and hand a victory to Sanders.
Now that Clinton has been declared the presumptive Democratic nominee, this leaves Sanders with a hard decision to make – accept it or fight until the death. Sure, a win in CA would help him pitch his future to superdelegates - but to what end? Sanders’ case is broken - Clinton won a majority of the states, pledged delegates and super delegates - not to mention tens of thousands of more votes. We think that despite Sanders’ reputation for obstinance, he’ll turn the corner once he realizes the only thing he can do between now and the convention in late July is hobble Clinton and her ability to get a head start on outmaneuvering Donald Trump, not to mention damage the party’s increasing chances at making gains in Congress.
No matter what happens in today’s primary, with Democrats adding 2.3 million voters to their ranks in the past four months, CA has become increasingly blue and will be an insurmountable challenge for Trump come November.
Libertarian presidential nominee Gary Johnson may not have solidified a serious position in the election race yet, but he’s sure on his way – he’s currently polling at 10 percent and gaining ground. Senator Ben Sasse (NE) – who was long considered as a potential third-party nominee – may be hopping on team Johnson. While Trump continues to double down on his hijinks and as Johnson begins to pick up big endorsements and earns media coverage - he’ll climb in the polls – something he needs to happen to be included in the general election debates.
This indispensable trading tool is based on a risk management signaling process Hedgeye CEO Keith McCullough developed during his years as a hedge fund manager and continues to refine. Nearly every trading day, you’ll receive Keith’s latest signals - buy, sell, short or cover.
Takeaway: Italian equities were among the big winners in European markets today but Europe is still slowing and Italy is still crashing.
Investors navel-gazing at the pop in European equities today shouldn't get too excited.
Here's analysis via Hedgeye CEO Keith McCullough in a note sent to subscribers earlier today:
"Big mean reversion move higher this morning for European Equities (which got hammered again last week); Italian stocks leading +1.99% on the MIB Index (after falling another -3.8% last week to -19% YTD); that’s helping US Equity futures, but #EuropeSlowing is not (yet) the latest bull case for US stocks."
Take a look at the chart below of select European equity markets and the respective drawdowns from the 52-week highs in the highlighted column.
Bottom Line: Italian and Spanish equities are still crashing...
Click image to enlarge.
Well ... do you?
Take a look below at the downwardly-revised projections for the year-end 2016 Fed Funds rate (via the median of the FOMC's dot plot) in the green line below. At its height in 2014, the FOMC expected the year-end 2016 Fed funds rate to be just shy of 3%.
The FOMC's March forecast? Under 1%.
Click to enlarge.
Looking out a few years, via their latest projections from March, the Fed heads expected the Fed funds rate will be just below 2% in 2017 and, in 2018, hit 3%.
Note: Less than 6 months into the year, the Fed has pivoted from hawkish (December) to dovish (March/April) to hawkish (May) and will now pivot back to dovish again. So the question now is what does that do to the dot plots?
The implied rate hike probability for June has been squashed to 0% today, versus 30% just eleven days ago the time span between which Fed head Janet Yellen flipped back to dovish again.
It's also worth reflecting on the historical market bets for a June rate hike, if only to visually understand the Fed's circuitous pivots from "hawkish to dovish." Six months ago, Fed funds futures put the probability of a June hike at a whopping 68%!
The risk to investors is believing the Fed's serially-overoptimistic forecasts.
The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.