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CHART OF THE DAY: The First Shot Fired Across The Credit Cycle Bow

Editor's Note: Below is a brief excerpt and chart from today's Early Look written by Hedgeye Financial analyst Josh Steiner. Click here to learn more.

 

"... Synchrony fired a shot across the credit cycle bow on Tuesday by raising its guidance for expected net charge offs from a range of 4.3-4.5% to a range of 4.5-4.8%. SYF shares reacted by dropping ~14%, while the rest of the card space followed suit: Capital One (COF) was down ~5%, Discover (DFS) was down ~3% and so on...

 

I think Synchrony’s announcement Tuesday will prove to be one of the early timestamps used in the future to mark the end of the current credit cycle. Incidentally, many of the lender stocks peaked in mid-2015." 

 

CHART OF THE DAY: The First Shot Fired Across The Credit Cycle Bow - 06.17.16 EL Chart


Capital Brief: Can Trump Beat Back The Three-Headed Monster?

Takeaway: Trump's Triple Threat; Slow Bern; Clinton's Comfort Zone

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.

 

Capital Brief: Can Trump Beat Back The Three-Headed Monster? - JT   Potomac under 1 mb

TRUMP’S TRIPLE THREAT

It’s been exactly one year since Donald Trump announced his candidacy for president and through many highs and more lows than anyone ever expected, he finds himself on the ropes again. Seven out of ten Americans give Trump unfavorable marks beating out Hillary Clinton’s high negatives by a healthy margin - and Clinton is now up 8-12 points over Trump in the general election.

 

Negative views of Trump are rising among a number of groups, jumping by double digits among liberals and conservatives, and among both Republican women and Democratic men. Even Republican leadership is scratching their heads and dodging questions regarding the presumptive nominee as the Republican party image faces historic lows.

 

Trump faces major challenges on three fronts: Clinton and the Dems, the media, and his fellow Republicans. He now has one month left to win over the Republicans and stanch the bleeding as the threat of a three-headed monster will be too difficult to overcome this fall.

SLOW BERN

In the beginning, few believed Bernie Sanders was a serious challenger to Clinton, but when the dust settled, Sanders won 23 primaries and more than 12 million votes, all while energizing progressives with calls for a political uprising. Sanders, who has spent most of his political career on the sidelines, is now a major symbol and is expected to play a feature role at July’s convention. He’s vowed to help Clinton defeat Trump and shepherd his supporters her way - but don’t forget to read the terms and conditions. Sanders will take his time before endorsing while aggressively pushing his leftist policy agenda to Clinton, party leaders and convention power brokers.

CLINTON’S COMFORT ZONE

Despite her success, Clinton ran a rather uneven primary failing to understand and then extinguish the Sanders threat from the onset. Her victory speech after CA marked a turning point and now, on top of an multi-million dollar advertising assault, robust voter turnout, and her prudent response to the tragedy in Orlando, Clinton is becoming more comfortable with her message and her measured attacks on Trump. She’s engaging the people and opening up more on the trail - but still needs to inject much-needed confidence back into party, win over Independents and doubtful voters.


Cartoon of the Day: Brexit

Cartoon of the Day: Brexit - Brexit cartoon 06.16.2016

 

A few catalysts to keep an eye on: 

  1. The Fed (Yellen went dovish yesterday and equities turned red on that into the close)
  2. Brexit (what if they do exit?)
  3. Mean Reversion and performance chasing

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Investors Losing Faith In Flippant Fed

Investors Losing Faith In Flippant Fed - Fed birdbrain cartoon 06.15.2015

 

For those of you keeping score, this year the Fed has shocked markets pivoting from hawkish to dovish a dizzying number of times. Here's the rundown:

 

Hawkish, December

Dovish, March

Hawkish, May

Dovish, June

 

Investors Losing Faith In Flippant Fed - Hawk dove cartoon 06.06.2016

 

Investors are justifiably frazzled and have scrambled to keep up with all the flip-flopping. When Yellen went hawkish in May, during a speech at Harvard University, she remarked that investors should "probably" expect a rate hike in the coming months.

 

Taking the Fed chair at her word, investors thought there was a greater than 50% chance the Fed would hike rates in July (see below). 

 

Today, markets think that possibility is essentially zero.

 

Click image to enlarge

Investors Losing Faith In Flippant Fed - rate hike prob 6 16

 

What's happening here?

 

Well, the Fed revised its dot plot (which shows each participant's expectations for future rate hikes). Interestingly, six Fed officials now see just one rate hike in 2016 versus just one participant suggesting as much in March. 

 

Investors Losing Faith In Flippant Fed - fed dot plog

 

It was quite the about-face for most FOMC members. As we noted earlier this week, San Francisco Fed head John Williams was publically calling for up to five rate hikes at the outset of this year. 

 

Then reality set in.

 

Here's what central planners have failed to fix:

 

 

(To name a few...)

 

And yet, here's the lead in yesterday's FOMC statement:

 

"Information received since the Federal Open Market Committee met in April indicates that the pace of improvement in the labor market has slowed while growth in economic activity appears to have picked up."

 

That's simply not true which is why we'll reiterate once again...

 

Fade Rosy Fed Forecasts


Drake: Why The Central Planning #BeliefSystem Is Breaking Down

 

 

In this excerpt from The Macro Show, Hedgeye Senior Macro analyst Christian Drake gives subscribers a brief tutorial on one of our top three Macro Themes.


NEWSFLASH: The Central Planning #BeliefSystem Is Breaking Down

Takeaway: The dollar is strengthening & U.S. equities are selling off after Yellen & Co went dovish yesterday. The #BeliefSystem is breaking down.

NEWSFLASH: The Central Planning #BeliefSystem Is Breaking Down - central bank cartoon 04.22.2016

 

It's happening.

 

Make no mistake. The #BeliefSystem that central planners can arrest economic gravity is breaking down. That's what we said in our 80-slide 2Q Macro Themes deck, released in April, and that's precisely what's playing out in macro markets today.

 

Despite dovish Fed rhetoric yesterday, the U.S. dollar is strengthening and equity markets are selling off, in direct opposition to Yellen & Co's intent.

 

 

Meanwhile, policymakers at the Bank of Japan have watched the Yen strengthen today too, with the JPYUSD cross hitting year-to-date highs, and the Nikkei self-destructing (it lost 3% today alone).

 

Keep in mind that Yen strength came after the BOJ announced today that it will continue to conduct open market operations at an annual pace of 80 trillion yen ($760 billion) and is maintaining its negative interest rate policy.

 

 

Here's additional analysis from Hedgeye CEO Keith McCullough in a note sent to subscribers earlier today:

 

"They’re really out on the central banking #BeliefSystem in Japan – on the heels of reiterating 80T (T = Trillion Yen), the Yen ramped +1.7% (vs USD) to yet another YTD high, and the Nikkei continued to crash, -3.1% overnight (-7.2% on the week) and -26.1% from last year’s cycle peak in Global Equities (July)"

 

Take a look at a chart of the Yen:

 

 

And here's the Nikkei crash. Not good...

  

 

Need to understand the #BeliefSystem breakdown fast?

 

Here's the full description from our 2Q Macro Themes deck:

 

Click to enlarge

NEWSFLASH: The Central Planning #BeliefSystem Is Breaking Down - q2 macro themes

 

We're reiterating that call this morning.

 

We'll leave you with this brief message from CEO Keith McCullough:

 

 

More to come.

 

 

NEWSFLASH: The Central Planning #BeliefSystem Is Breaking Down - central banker house of cards


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 80.33%
  • SHORT SIGNALS 78.51%
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