“I don’t believe in dying. It’s been done. I’m working on a new exit. Besides, I can’t die now – I’m booked.”

-George Burns

The late George Burns was a beauty. So is this global stock market. Of all the 1-12 month old narratives on why it can’t die now, “no Brexit” has to be the best one I’ve heard so far. Especially for super short-term investors, it’s the most irrefutable!

A New Exit! - Brexit cartoon 06.16.2016

Back to the Global Macro Grind

So if they the British don’t exit… and:

  1. The British Pound ramps right back to where it’s been multiple times this year ($1.46-1.47)
  2. The FTSE rips right back to intermediate-term @Hedgeye TREND resistance of 6335
  3. All equity markets worldwide go straight up …

What could possibly go wrong?

Nothing, obviously. Until the causal factor (worldwide cyclical and secular #GrowthSlowing) on why most things political that are American, Chinese, European, Japanese, etc. aren’t dying starts to get reported again, that is…

Before we get all emotional this morning and chase another chart to lower-highs on green, let’s take a step back and review where Global Equity markets are vs. June 20th (today) of 2015:

  1. SP500 = down -1.4%
  2. Dow = down -1.5%
  3. Nasdaq = down -5.2%
  4. Russell 2000 = down -9.7%
  5. Financials (XLF) = down -9.7%
  6. Utilities = UP +17.5%
  7. MSCI REIT = UP +9.9%
  8. US Equity Volatility (VIX) = UP +33.9%
  9. EuroStoxx600 = down -15.1%
  10. China (Shanghai Comp) = down -41.9%
  11. Hang Seng = down -24.6%
  12. Nikkei = down -22.8%
  13. MSCI World = down -7.2%
  14. MSCI EM = down -16.8%
  15. MSCI LATAM = down -17.0%

Don’t worry. I’m not just cherry picking the year-over-year return today. I can do this, every day, for the next month and the year-over-year return in most things US Equities will actually get worse.

What’s been getting better and better for the last year has been the relative and absolute return of being long assets that do well when real economic growth is slowing.

This is why longer-term bonds (and stocks that look like bonds) have been crushing it:

  1. US 10yr Yield = down 71 basis points year-over-year
  2. German 10yr Yield = down 79 basis points year-over-year
  3. Italian 10yr Yield = down 80 basis points year-over-year
  4. China 10yr Yield = down 70 basis points year-over-year
  5. South Korean 10yr Yield = down 96 basis points year-over-year
  6. Indonesian 10yr Yield = down 97 basis points year-over-year
  7. Japanese 10yr Yield = down 63 basis points year-over-year

Will a “no-Brexit” change this very obvious intermediate-term TREND? On its own, no. Time will.

Because it doesn’t line up with their own investment mandates (i.e. always be long so timing can’t really ever matter), this is what most equity bench-marking Portfolio Managers have had wrong for the last year – timing the economic cycle.

Time can’t die now. Barring any miracle that most of the central planning that’s been attempted can stop #TheCycle from doing what it always does when it laps the peaks of the economic, profit, and credit cycles… the cycle will continue to slow.

As the latest of #LateCycle components of a cycle slow (employment growth, consumer credit, advertising/marketing, business travel, etc.), we’ll get better and better entry points in certain equity sector styles.

Our long-cycle call for #GrowthSlowing probably won’t die this morning either. “No Brexit” or not, it’s booked until at least Q3/Q4 when macro markets have fully priced it in.

Our immediate-term Global Macro Risk Ranges are now:

UST 10yr Yield 1.54-1.72%

SPX 2055-2095


DAX 90

VIX 16.08-23.33
USD 93.18-95.25
EUR/USD 1.11-1.14

Gold 1

Best of luck out there this week,


Keith R. McCullough
Chief Executive Officer

A New Exit! - 06.20.16 Chart