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CHART OF THE DAY: Yellen's Favorite Indicator Prints Worst Reading Since 2009

Editor's Note: Below is a brief excerpt and chart from today's Early Look written by Hedgeye U.S. Macro analyst Christian Drake. Click here to learn more. 

 

"... Janet’s favored dashboard labor Indicator, The Labor Market Conditions Index (LMCI) dropped to an index reading of -4.8 in May, marking a 5th consecutive month of decline, a 7th straight months of deteriorating conditions and the worst reading since 2009."

 

CHART OF THE DAY: Yellen's Favorite Indicator Prints Worst Reading Since 2009 - 06.10.16 EL


Cartoon of the Day: Drinking The Kool-Aid?

Cartoon of the Day: Drinking The Kool-Aid? - central bank kool aid 06.09.2016

 

Did you drink the central planning Kool-Aid?


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...


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 80.65%
  • SHORT SIGNALS 78.62%

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?"


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.


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