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Daily Market Data Dump: Wednesday

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

 

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Daily Market Data Dump: Wednesday - equity markets 6 8

 

Daily Market Data Dump: Wednesday - sector performance 6 8

 

Daily Market Data Dump: Wednesday - volume 6 8

 

Daily Market Data Dump: Wednesday - rates and spreads 6 8

 

Daily Market Data Dump: Wednesday - currencies 6 8


The Macro Show with Darius Dale Replay | June 8, 2016

CLICK HERE to access the associated slides.

 

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


Down Dollar Reflation

Client Talking Points

Energy

1st time we've registered this signal in my Top 3 Things, but literally every equity expression of Oil/Energy is signaling immediate-term TRADE overbought this morning (XLE, XOP, OIH, Russian Stocks, etc.); reminder that what was TREND resistance for WTI ($47.07/barrel) is now support. Q: can they keep USD Down, Oil Up throughout the summer?

Russia

Forget Chinese demand continuing to slow (see this morning’s Export numbers for details), the real alpha out there next to being long real world #GrowthSlowing and Bond Proxies is in anything that looks like a commodity, including countries – that’s not a new story; that’s simply reflating the deflation (RTSI up another +0.8% this morning and +5% m/m).

UST 10YR

If reflation was real growth, the 10yr wouldn’t be setting itself up for all-time lows – but you already know that. Risk Range on UST 10yr is now 1.64-1.79% after barely trying to bounce yesterday from its jobs day bomb.

Asset Allocation

CASH US EQUITIES INTL EQUITIES COMMODITIES FIXED INCOME INTL CURRENCIES
6/7/16 74% 0% 0% 4% 14% 8%
6/8/16 74% 0% 0% 4% 14% 8%

Asset Allocation as a % of Max Preferred Exposure

CASH US EQUITIES INTL EQUITIES COMMODITIES FIXED INCOME INTL CURRENCIES
6/7/16 74% 0% 0% 12% 42% 24%
6/8/16 74% 0% 0% 12% 42% 24%
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
MCD

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.

TLT

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!

GLD

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

TWEET OF THE DAY

At 1.71% UST 10yr Yield the @Hedgeye call for all-time lows as growth slows remains firmly intact pic.twitter.com/flGE3O413e

@KeithMcCullough

QUOTE OF THE DAY

"If you treat every situation as a life and death matter, you'll die a lot of times."

-Dean Smith

STAT OF THE DAY

Chipper Jones had 2499 at bats for the Atlanta Braves, he had 2726 hits.


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CHART OF THE DAY | Neck & Neck: Trump vs. Clinton

Editor's Note: Below is a brief excerpt and chart from today's Early Look written by Hedgeye Director of Research Daryl Jones. Click here to learn more.

 

"... Settings aside something coming from left field (or an errant email server), this race is down to The Donald versus Hillary. As of this morning and as you can see in the Chart of the Day, the pollsters are basically showing it to be a statistical tie. To the chagrin of many, the Donald is in it to win it and has a real chance to do so. The next 5 months may have to be the grittiest and most determined of Hillary Clinton’s political life."

 

CHART OF THE DAY | Neck & Neck: Trump vs. Clinton - 06.08.16 EL Chart


Grinding It Out

“Superlative performance is really a confluence of dozens of small skills or activities, each one learned or stumbled upon, which have been carefully drilled into habit and then are fitted together in a synthesized whole.”

-Dan Chambliss from “The Mundanity of Excellence”

 

We’ve been enjoying reading a book recently called, “Grit: The Power of Passion and Perseverance”, which analyzes the roots of success. As you guessed from the title, the book postulates that the single most important factor in determining whether an individual will be successful is whether they are “gritty”.

 

For those of you that have been subscribing to Hedgeye, you know full well this idea of grit is basically our mantra.. We are pretty comfortable that we aren’t the smartest or most talented in the room, but we think we can be the hardest working and most passionate.

 

The author of the aforementioned book, Angela Duckworth, attempts to quantify grit and in doing so has shown it predicts very effectively which cadets at West Points will succeed or fail, what inner city high school students will go on to higher academic levels, and what elementary school students will win spelling bees, among other things.

 

Interestingly, and apropos to today, the author also discusses Bill and Hillary Clinton and pans this idea that he is a natural and gifted politician and she will never be his equal. Setting aside your view of her politics, it is very difficult to disagree with the idea that she is one of the grittiest of modern political figures. These traits have rewarded her with many political victories and finally she has become her party’s nominee for President.

 

Settings aside something coming from left field (or an errant email server), this race is down to The Donald versus Hillary. As of this morning and as you can see in the Chart of the Day, the pollsters are basically showing it to be a statistical tie. To the chagrin of many, the Donald is in it to win it and has a real chance to do so. The next 5 months may have to be the grittiest and most determined of Hillary Clinton’s political life.

 

Back to the Global Macro Grind

 

Yesterday in the Early Look, Keith wrote that subscribers he is speaking to on the road are extolling the fact that the SP500 is now back to flat on the year. In fact, as of this morning, over the last year the SP500 is up +1.58%. If you were able to get positive absolute equity alpha in the last 12-months, congrats on the grinding! It hasn’t been easy.

 

In Europe this morning, the central bankers are persevering with their dovishness and the ECB’s corporate bond buying program kicks off. According to reports, the buying will be broad based with a focus on utility, insurance and telecom bonds. Someone should let Draghi know we have some “great” MLP paper he can buy in the U.S...

 

Grinding It Out - Brexit cartoon 06.07.2016

 

The implementation of corporate bond purchasing this morning dovetails with the latest poll from Pew ahead of the June 23rd Brexit vote. According to the poll, Europe, not surprisingly, is very much split with 47% of nations holding an unfavorable view of the EU and 51% in favor. Not surprising, support for the EU is lowest in these nations – Greek at 27%, France at 38%, UK at 44%, and Spain at 47%. Meanwhile, majorities in all countries except Germany and Poland also disapproved of the EU’s handling of the economy.

 

On the topic of Brexit, we will be doing a call this morning with Alexander Nicoll from the International Institute for Strategic Studies. He will be joined by Hedgeye Potomac’s Managing Director JT Taylor and our Senior Defense Policy Analyst Lt. General Emo Gardner. In a nutshell, the view is that we think Brexit will not occur and we’ll present the framework for why we believe this is the case. The call will occur today at 11am ET, please email for details.

 

Employment data from Britain this morning reinforces the view that Brexit is unlikely to occur. According to data from the Recruitment and Employment Confederation, UK firms increased staff numbers at the lowest rate in eight months due to “worries about the EU referendum”. Ironically, many UK firms are seeing candidate shortages, but due to the economic uncertainty around the referendum are unwilling to make hiring decisions. The economy still does matter, stupid.

 

Speaking of grinding, the PBOC ground out some new economic projections this morning. The Chinese central bank kept GDP unchanged at +6.8%, revised up CPI to +2.4%, revised up fixed asset investment growth to +11.0%, and revised down export growth to -1%. The World Bank also offered a new global growth projection that reduced growth to +2.4% for 2016, which was a 0.5% reduction from January.

 

Hmmm, global growth rates reduced by 20% and exports and the world’s second largest economy turning negative? Maybe those muckers and grinders at Hedgeye are on to something with their #GrowthSlowing view.

 

Our immediate-term Global Macro Risk Ranges are now:

 

UST 10yr Yield 1.64-1.79%

SPX 2080-2116

VIX 13.01-16.80
USD 93.34-95.25
Oil (WTI) 47.59-51.09

Gold 1

 

Keep your head up and stick on the ice,

 

Daryl G. Jones

Director of Research

 

Grinding It Out - 06.08.16 EL Chart


JT TAYLOR: Capital Brief

Takeaway: Golden State Warrior, Bernie Weakened; Trump Dials it Back??

JT TAYLOR:  Capital Brief  - JT   Potomac banner 2

 

GOLDEN STATE WARRIOR: With wins in CA, NJ, SD and NM last night, Hillary Clinton has now fully assumed the mantle of presumptive Democratic nominee. She has been victorious in a majority of the primaries, garnered three million more votes than her opponents, has 2,497 pledged delegates to Bernie Sanders’ 1,663, and has 571 superdelegates to Sanders’ 48. The party will now begin to unify around her with a popular president by her side as she moves into the next phase of her campaign. She and her allies will continue to define and dismantle Donald Trump and his policies; Priorities USA, a pro-Clinton super PAC, has allocated $20 million for an ad buy against Trump – building on her effective foreign policy speech last week pegging him as unfit to be president. Clinton will also need to reassess her trust and likeability factors – repairing and retooling her image will be critical - it will become her advantage when voters decide the “lesser of two evils.”

 

WEAKENED AT BERNIE’S: Bernie Sanders is all but out of the race – but that doesn’t mean he’s dropping out...In order to be viable for the nomination at this juncture - Sanders’ only option is to flip superdelegates – something that remains completely unrealistic (he’s flipped one in six months). He and some in his inner circle have been hard-pressed to accept his fate, but nonetheless he says he will not relent until the convention. With Minority Leader Nancy Pelosi’s endorsement of Clinton and President Obama’s expected soon, Sanders risks becoming a pariah in his party the longer he holds out.

 

TRUMP DIALS IT BACK?: The criticism over Trump’s comments on the impartiality of a federal judge with Mexican heritage continues in force, but he’s attempting to take a step back and assess it from a different angle – classifying his remarks as “misconstrued.” Though Trump did not apologize or show regret in his statement, it’s a sign that he’s reassessing given the universal condemnation he’s invited - and that’s just from his fellow party comrades.  He may want to change the subject, but we think he may not have the luxury of doing so this time around.

 

“A BETTER WAY”: Speaker Ryan rolled out a wide-ranging conservative agenda just a few weeks ahead of the Republican convention in July. The product of several task forces and dozens of meetings with House members outlines conservative proposals for jobs and the economy, taxes, health care, national security, constitutional authority, and poverty. The plan is a byproduct  of the autopsy of the failed 2012 Romney campaign as well as Ryan’s vision for an optimistic agenda for his Congressional colleagues and the party writ large. Ultimately, in the face of Trump terrorizing the party – the proposal gives Republicans a platform to run on in the fall, trying to put the Republican party back on track.

 

UNDER THE RADAR: With the spotlight on the main presidential event, CA voters sent two Democratic candidates to a Senate seat runoff in November– shutting Republicans out in a sign of the party’s diminishing support in America’s most populous state. CA hasn’t elected a Republican Senator since 1988 – in fact – it hasn’t elected any Republican candidate to any statewide office since 2006. We continue to reiterate our view that CA will be bluer than ever. Trump is delusional if he thinks he can be competitive in CA come November.

 

DISMANTLING DODD-FRANK: Financial Services Chairman Jeb Hensarling (TX) and “The Financial Choice Act” takes a shot at reforming Dodd-Frank and aims to dismantle portions of the regulatory overhaul. The plan has little hope of passing Congress this year – but is poised to influence both the presidential debates as well as the Republican Congressional agenda. The bill aims to replace the financial reform law’s “orderly liquidation authority,” repeal the Volcker Rule, restructure the CFPB, and the FSOC from designating any non-banks as “systemically important.”

 

NOC SEEING THE PINCH OF THE BOMBER WIN?: Check out our Senior Defense Policy Advisor LtGen. Emo Gardner’s insight on Northrop Grumman CEO's statement that he is "biasing more of our capital" inside NOC could be early indicator of future reduced margins as result of LRS-B win “NOC Seeing the Pinch of the Bomber Win?

 

FIRST OF MANY HHS BUDGET UPDATES; POSITIVE-MA PLANS, DRUGS & SERVICES; NEGATIVE- INSURERS: Our Healthcare Policy Advisor Emily Evans shares her insight on a Senate Appropriations Subcommittee approving the FY 17 HHS spending bill and more “First of Many HHS Budget Updates; Positive-MA Plans, Drugs & Services; Negative-Insurers

 

BREXIT: SHOULD I STAY OR SHOULD I GO?: Join us for a call today 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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