CLIENT TALKING POINTS
EUROPE
Big bear market slash Brexit bounce this morning as Osborne threatens tax hikes – levels matter here as yesterday was a big immediate-term oversold signal in almost every major European index. The FTSE is up +1.1% to 5,986 and would need to recapture 6,305 to not be bearish TREND however.
OIL
Oil is trading almost textbook range-bound now as opposed to ramping higher every week. WTI is +30% in 3 months, but -20% in the last year, so this is where we expect to see more chop after signaling immediate-term overbought last week. The risk range for WTI is now $47.05-49.59 with Oil Volatility (OVX) back up to 43.
S&P 500
If you give us a 50 handle drop in less than a week, I’m covering SPY ahead of the Fed meeting on that oversold signal. I also signaled buy Healthcare (XLV) for the 1st time in 2016 yesterday, added long High Dividend Yield (VYM), and big cap/low beta with something like LMT (all in Real-Time Alerts).
TOP LONG IDEAS
TLT
No matter what side of the reflation/deflation trade you’re on, the growth in global demand continues to decelerate on a trending basis. The debate is no longer whether or not growth is slowing. The real debate centers on the policy response and the market reaction to that policy response. While that question presents us with “open the envelope” risk, #GrowthSlowing will continue to be the bull catalyst for U.S. Treasuries whatever the policy response as the slow march to zero yields globally goes on.
GLD
To sum things up, stay away from the guessing game and stick to what is empirically evident. A stronger USD over the longer term is a probable scenario in our book. We expect the Fed, and all central banks for that matter, will try to combat deflation. That said, global currencies all burning at the same time makes a compelling case for GLD, as gold knows no currency. You can sell it in local currency all over the world. Scary but true.
MCD
There have been rumblings in the news that McDonald's (MCD) 2Q comps have slowed due to the temporary replacement of the 2 for $5 value platform for Monopoly. This has clearly been reflected in the stock as of late, as MCD has underperformed the S&P 500 over the last month.
Despite this near term headwind, we still strongly believe in the long-term story for MCD and remain confident that once they get their value platform right nationally, they will be just fine. In the short to intermediate term, as we wait for a solidified value platform, this recent underperformance represents a great buying opportunity. We remain LONG MCD.
Asset Allocation
| CASH | US EQUITIES | INTL EQUITIES | COMMODITIES | FIXED INCOME | INTL CURRENCIES | |
|---|---|---|---|---|---|---|
| 6/14/16 | 64% | 2% | 0% | 6% | 19% | 9% |
| 6/15/16 | 64% | 6% | 0% | 6% | 18% | 6% |
Asset Allocation as a % of Max Preferred Exposure
| CASH | US EQUITIES | INTL EQUITIES | COMMODITIES | FIXED INCOME | INTL CURRENCIES | |
|---|---|---|---|---|---|---|
| 6/14/16 | 64% | 6% | 0% | 18% | 58% | 27% |
| 6/15/16 | 64% | 18% | 0% | 18% | 55% | 18% |
THREE FOR THE ROAD
TWEET OF THE DAY
**NEW VIDEO Drake: Keep An Eye On (Decelerating) Income Growth https://app.hedgeye.com/insights/51688-drake-keep-an-eye-on-decelerating-income-growth … via @HedgeyeUSA
QUOTE OF THE DAY
You must never be fearful about what you are doing when it is right.
Rosa Parks
STAT OF THE DAY
Brexit? Currency traders have doubled their wagers on the pound returning to $35 billion, levels not seen since the 1980s.
