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Capital Brief: Clinton's Courtship... & Trump's Worst Week Ever

Takeaway: Clinton's Courtship; Self-Inflicted Wounds; Extinguishing The Flame;

Capital Brief: Clinton's Courtship... & Trump's Worst Week Ever - capital brief

 

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 sales@hedgeye.com.

CLINTON’S COURTSHIP

Capital Brief: Clinton's Courtship... & Trump's Worst Week Ever - clinton sanders

 

The rivalry between Hillary Clinton and Bernie Sanders moves into a new phase where Clinton hopes to soothe tensions and move the party towards unification and eventually instill enthusiasm among Sanders’ loyalists. It won’t be completely one-sided and no candidate will get their own way – and she’ll likely have to concede more ground on trade, financial services, as well as labor issues.

 

If Clinton wants to get a head start on beating Donald Trump in the fall, she and Democratic party chieftains need appeal to him and his most fervent followers who toil outside the traditional boundaries of the Democratic party. As we’ve noted before, look for Senator Elizabeth Warren to play a central role in brokering a deal in the coming days.

SELF-INFLICTED WOUNDS

Capital Brief: Clinton's Courtship... & Trump's Worst Week Ever - trump sad

 

Bad week for Trump and the timing couldn’t be worse. Party leaders are admonishing him to avoid controversy and focus on policy issues - and fast. With the Democrats uniting - and with five months to go to election day - they fear that they’ll be dragged down with him if he doesn’t pivot away from his sideshows and focus on what Americans care about.

EXTINGUISHING THE FLAME

Sanders hasn’t sacked his campaign, but he is sure to shortly. With DC being the only remaining primary and Clinton’s grip on the nomination all but assured, his campaign has begun laying off staff as a large majority of superdelegates are expected to go public with a Clinton endorsement.

 

Sanders will meet with President Obama this morning and Minority Leader Harry Reid later in the day -who along with Warren will work to convince Sanders to exit gracefully. Sanders says he’ll remain in the race until next week’s DC primary – but the reality of flipping over 400 superdelegates is starting to sink in...


The NIRP Effect: How Central Planners Are Pancaking Global Bond Yields

Takeaway: A look at the pancaking of yield curves around the globe.

The NIRP Effect: How Central Planners Are Pancaking Global Bond Yields - bond yields

 

Below are sovereign bond yields for select countries with negative interest rate policies. The graphs show the yield curves for those sovereign bonds today (green line) versus where they were last year (yellow line).  

 

German 10yr:

 

6/9/15: 0.949% 

Today: 0.037%

 

Click images to enlarge.

The NIRP Effect: How Central Planners Are Pancaking Global Bond Yields - german yield curve

 

Japanese 10yr:

 

6/9/15: 0.448%

Today: -0.131%

 

The NIRP Effect: How Central Planners Are Pancaking Global Bond Yields - japan yield curve

 

Swiss 10yr:

 

6/9/15: 0.211%

Today: -0.48%

 

The NIRP Effect: How Central Planners Are Pancaking Global Bond Yields - switzerland yield curve

 

How This Whole thing Shakes Out is anyone's guess.


The Great Debate: Reflation Versus Deflation

The Great Debate: Reflation Versus Deflation - reflation cartoon 10.13.2015

 

Good thing the jobs number was a bomb.

 

Heading into today SPY was up for 5 of the last 6 days on a massive reflation move that squashed the dollar as investors bet Dovish Fed = Down Dollar = Stocks Up. The U.S. Dollar index is down -1.7% since then.

 

The Great Debate: Reflation Versus Deflation - dxy index 6 9

 

But with the dollar up today, the reflation trade has been unravelling a bit. 

 

 

Where do we go from here?

 

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

 

"With USD signaling immediate-term TRADE oversold this wk, did we see the final push/capitulation/chase in all things Down Dollar Dovish Fed, or is reflating the former bubble just getting started? Sounds like a Q3 Hedgeye Macro Theme in the works… Oil +41% in the last 3 months but Copper -6.4% - demand?"


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A Closer Look At Consensus Positioning (& Why We Completely Disagree)

Takeaway: Consensus is overwhelmingly long the S&P 500 and short 10yr Treasuries. Don't do that!

A Closer Look At Consensus Positioning (& Why We Completely Disagree) - consensus positioning

 

Consensus is overwhelmingly long the S&P 500 and short 10yr Treasuries. 

 

Before you dogpile in on that. Consider where we're at...

 

In her most recent speech, Fed head Janet Yellen expressed concern about the jobs market, while reiterating that the Fed is data dependent. In the past six months, the Fed pivoted from Hawkish (in December) to Dovish (March/April) to Hawkish (May). Market consensus now perceives Yellen and the Fed as flipping back to Dovish in June.

 

Meanwhile, Yellen’s favorite economic indicator (the “Labor Market Conditions Index”) just hit a 7-year low and credit growth had its biggest deceleration since 2010.

 

In other words, U.S. #GrowthSlowing.

 

So, what’s an investor to do?

 

The Fed is perpetuating volatility in macro markets, so stick with what’s worked all year, Long Bonds (TLT). Stating the obvious, that is the exact opposite of how Macro consensus is positioned. TLT has been our most vocal macro call for a while now and has served us well. It is up around 11% YTD versus 3% for the S&P 500.


[UNLOCKED] Keith's Daily Trading Ranges

We've made some new enhancements to Daily Trading Ranges - our proprietary buy and sell levels on major markets, commodities and currencies sent to subscribers weekday mornings by CEO Keith McCullough. Click here to view a brief video of McCullough explaining how to use it most effectively.

 

Subscribers now receive risk ranges for 20 tickers each day -  the last five of which are determined by what's flashing on Keith's screen and by what names subscribers are asking about. Click here to subscribe.

 

  • Bullish Trend
  • Bearish Trend
  • Neutral

INDEX BUY TRADE SELL TRADE PREV. CLOSE
UST10Y
10-Year U.S. Treasury Yield
1.78 1.64 1.71
SPX
S&P 500
2,082 2,121 2,119
RUT
Russell 2000
1,139 1,195 1,188
COMPQ
NASDAQ Composite
4,872 4,995 4,974
NIKK
Nikkei 225 Index
16,303 16,972 16,830
DAX
German DAX Composite
10,015 10,368 10,217
VIX
Volatility Index
13.02 16.75 14.08
USD
U.S. Dollar Index
93.15 94.87 93.60
EURUSD
Euro
1.10 1.14 1.13
USDJPY
Japanese Yen
105.53 108.77 107.00
WTIC
Light Crude Oil Spot Price
47.78 51.37 51.53
NATGAS
Natural Gas Spot Price
2.12 2.60 2.46
GOLD
Gold Spot Price
1,240 1,270 1,265
COPPER
Copper Spot Price
2.02 2.11 2.06
AAPL
Apple Inc.
96.73 100.99 98.94
AMZN
Amazon.com Inc.
697 734 726
MCD
McDonald's Inc.
120 124 122
NFLX
Netflix Inc.
96 102 97
GOOGL
Alphabet Inc.
716 751 742
GIS
General Mills Inc.
63.00 64.75 64.42



A Brief History Of The #CreditCycle via Hedgeye's Darius Dale

Takeaway: "We are loudly reiterating our call that the unwind of ZIRP and QE will continue to deflate the easy money credit boom it fabricated..."

A Brief History Of The #CreditCycle via Hedgeye's Darius Dale - Fed cartoon 10.24.2014

 

Below is an essential risk management chart via Hedgeye Senior Macro analyst Darius Dale. Here's the key callout on the #CreditCycle from our quarterly Macro Themes deck:

 

"We are loudly reiterating our call that the unwind of ZIRP and QE will continue to deflate the easy money credit boom it fabricated in the form of continued recessionary earnings growth as the business cycle gets dangerously long in the tooth."

 

Click image to enlarge. 

A Brief History Of The #CreditCycle via Hedgeye's Darius Dale - delinquencies rising


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 80.28%
  • SHORT SIGNALS 78.51%
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