prev

Daily Market Data Dump: Thursday

Takeaway: A closer look at global macro market developments.

Editor's Note: Below are complimentary charts highlighting global equity market developments, S&P 500 sector performance, volume on U.S. stock exchanges, and rates and bond spreads. It's on the house. For more information on how Hedgeye can help you better understand the markets and economy (and stay ahead of consensus) check out our array of investing products

 

CLICK TO ENLARGE

 

Daily Market Data Dump: Thursday - equity markets 6 23

 

Daily Market Data Dump: Thursday - sector performance 6 23

 

Daily Market Data Dump: Thursday - volume 6 23

 

Daily Market Data Dump: Thursday - rates and spreads 6 23

 

Daily Market Data Dump: Thursday - currencies 6 23


McCullough: Chasing European Stocks? Don't Look At This Sobering Data

Takeaway: Investors buying the pop in European equities will have deal with unequivocally bearish data that doesn't go away post today's Brexit vote.

McCullough: Chasing European Stocks? Don't Look At This Sobering Data - eu ref 

 

I guess no Brexit was the 2016 Global Equity bull market catalyst all along!

 

The pound tapped $1.49 this morning and that’s one mother of a move in the context of where GBP/USD has been for the last 6 months – on my immediate-term signal, that’s pricing in a triple-no-exit! I’m going into this with no FX position (sorry, can’t build my research firm on coin tosses) other than long Gold (risk range 1253-1306/oz).

 

 

Meanwhile, the FTSE is up +1.4% to 6349 with a refreshed immediate-term risk range of 5819-6403 so the asymmetry from here is to the downside; same thing with the DAX on a risk range of 9370-10331 – if they leave, many Global Equity markets will resume their draw-downs (and crashes) from their 2015 cycle peaks – if they remain, they probably sell on the news anyway.

 

Here's the unequivocally bearish data that doesn't go away post today's Brexit vote:

 

 

And imagine what happens to these stock market chasers if they vote to leave? No blaming machines...

 


The Macro Show with Christian Drake Replay | June 23, 2016

CLICK HERE to access the associated slides.

 

An audio-only replay of today's show is available here.


Attention Students...

Get The Macro Show and the Early Look now for only $29.95/month – a savings of 57% – with the Hedgeye Student Discount! In addition to those daily macro insights, you'll receive exclusive content tailor-made to augment what you learn in the classroom. Must be a current college or university student to qualify.

Brexit?

Client Talking Points

Pound

Tapped $1.49 this morning and that’s one mother of a move in the context of where GBP/USD has been for the last 6 months – on my immediate-term signal, that’s pricing in a triple-no-exit! I’m going into this with no FX position (sorry, can’t build my research firm on coin tosses) other than long Gold (risk range 1253-1306/oz).

FTSE

+1.4% to 6349 with a refreshed immediate-term risk range of 5819-6403 so the asymmetry from here is to the downside; same thing with the DAX on a risk range of 9370-10331 – if they leave, many Global Equity markets will resume their draw-downs (and crashes) from their 2015 cycle peaks – if they remain, they probably sell on the news anyway.

UST 10YR

Why is it that many investors like to buy things on sale other than long-term Treasuries? At 1.74% on the UST 10YR, I wouldn’t call it a layup (I’m really bad at basketball), but this is just one of the more obvious buying opportunities we’ve had in long-term #GrowthSlowing bonds in the last year.

Asset Allocation

CASH US EQUITIES INTL EQUITIES COMMODITIES FIXED INCOME INTL CURRENCIES
6/22/16 61% 3% 0% 12% 21% 3%
6/23/16 61% 3% 0% 12% 21% 3%

Asset Allocation as a % of Max Preferred Exposure

CASH US EQUITIES INTL EQUITIES COMMODITIES FIXED INCOME INTL CURRENCIES
6/22/16 61% 9% 0% 36% 64% 9%
6/23/16 61% 9% 0% 36% 64% 9%
The maximum preferred exposure for cash is 100%. The maximum preferred exposure for each of the other assets classes is 33%.

Top Long Ideas

Company Ticker Sector Duration
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.

Three for the Road

TWEET OF THE DAY

The Astonishing Audacity Of Central Planners app.hedgeye.com/insights/51883… cc @KeithMcCullough #Fed #ECB #BOJ #Yellen #FX pic.twitter.com/k2f4vp4RM8

 @Hedgeye

QUOTE OF THE DAY

“The day you think there are no improvements to be made is a sad day.” 

-Lionel Messi     

STAT OF THE DAY

John Smoltz pitched 21 years in the MLB, his career ERA was 3.33.


CHART OF THE DAY: Brexit: 'Brits Don't Quit!'

Editor's Note: Below is an excerpt and chart from today's Early Look written by Hedgeye Director Matthew Hedrick. Click here to learn more.

 

"... But will Brits actually vote themselves out of the EU?  We’ll reiterate here that we expect the Remain camp to prevail, but as the aggregate “Poll of Polls” below shows, it’s a split race (50/50).  In addition, recent results of individual polls show there’s a very sizable number of undecided voters, representing some 6% to 13%, depending on the poll, who we think will tip the balance marginally to Remain."

 

CHART OF THE DAY: Brexit: 'Brits Don't Quit!' - Brexit EL 1


EU’s Super Spotlight

“Brits Don’t Quit!”

-David Cameron

 

The vote for Brexit is upon us, TODAY!  And to boot, on Sunday Spain holds its second general election in the last six months to elect a government. 

 

Regardless of where you stand on the outcome of these risk events, today’s interconnected markets do force us all to constantly absorb new economic, political, and social events around the globe, sometimes more and sometimes less, as they impact our investment portfolios.  And this, of course, is what fuels what it is we do as global macro risk managers at Hedgeye!

 

Back to the Global Macro Grind

 

Brexit risk has been on the table for a while – after all, UK PM David Cameron set into motion the Brexit referendum (to give Brits the decision to Remain or Leave the EU) back on September 1st of last year.

 

But will Brits actually vote themselves out of the EU?  We’ll reiterate here that we expect the Remain camp to prevail, but as the aggregate “Poll of Polls” below shows, it’s a split race (50/50).  In addition, recent results of individual polls show there’s a very sizable number of undecided voters, representing some 6% to 13%, depending on the poll, who we think will tip the balance marginally to Remain.

 

EU’s Super Spotlight - Brexit EL 1

 

What Tips the Scales?  From the outset, the referendum vote has been an emotionally charged one rather than one grounded in indisputable facts and figures.   

 

Whether it’s Cameron and Co. banging the boards with Brits Don’t Quit!”, stating that the UK is economically strong and safer in the EU to Eurosceptics running with “Take Back Control” and spouting the benefits of sovereignty from Brussels and checks on immigration, this referendum has not been anchored in pure logic, fact based decision making.

 

It’s grounded in behavioral psychology!

 

As we’ve noted in previous work, the behavioral economist Richard Thaler, in his book Misbehaving, helps us understand behavioral factors influencing the British voter:

 

“While loss aversion is certainly part of the explanation for our findings, there is a related phenomenon: inertia. In physics, an object in a state of rest stays that way, unless something happens. People act the same way: they stick with what they have unless there is some good reason to switch.” (Misbehaving, pg 155)

 

To our reasoning, there hasn’t been overwhelming evidence to switch course, and so we believe it follows that voters won’t choose to Leave. Inertia! 

 

Below we offer additional emotional-based factors at play that we suspect will further sway the undecided voter to the Remain camp:

  • Numerous perceived experts (from the IMF and World Bank to the Bank of England’s Mark Carney) have stated a strong case of economic harm if the UK leaves (coincidentally the “famed” investor George Soros recently said Sterling could plunge >20% on an exit). Experts, even if they’re wrong, can be emotionally easier to support.
  • The very recent terrorist attacks in Orlando, Florida on the 12th of this month combined with the terrorist attacks in Brussels on March 22, 2016 are fresh reminders of the globe’s safety concerns, which dovetails nicely with Cameron’s forceful and repeated messaging that a UK in the EU is safer than one out.   
  • Politically, we do not suspect the country is willing to risk a political power vacuum over this vote, as PM Cameron would likely have to step aside if Brexit prevailed.
  • The fear of the unknown looms large:  yes, new trade agreements could be arranged across the globe, but at what cost, and how soon?  The benefits and “ease” of the existing, established trade arrangements, especially with the EU as the UK’s largest trading partner, should stand front and center to support Remain.  
  • Unlike in the Eurozone, Brits have their own central bank and independent currency, which we think will marginally support Remain over Leave.
  • Even the soccer star/celebrity David Beckham is vocally supporting Remain!

Positioning Set-up?  Polls close at 10pm UK time so an indication of results could come late this evening eastern time, with a decision reached by early tomorrow morning.

 

The GBP/USD has been whipsawed by the referendum and has gained ~+4.5% to $1.4905 (its strongest level in five months) in the last week alongside the Remain camp gaining a slight advantage in polling, rising a full +1.3% intraday.  We expect a Remain decision to move the GBP/USD slightly higher, yet believe the bulk of the move has already been priced in.

 

And should Leave prevail, look out below!

 

Further, we believe European Stocks are about to make another lower-high within their bearish @Hedgeye TRENDs and that our 11-month old tendency to stay with our local and global #GrowthSlowing call will Remain.

 

EU’s Super Spotlight - Brexit EL 2

 

Spain to the Polls, Again!

 

Moving south on the continent, Spaniards are set to go to the polls on Sunday, and with it create another political “event” on the continent this week!   

The rub this time around appears similar to when Spaniards went to the polls in December 2015:

  1. There’s a lack of trust in Mariano Rajoy, leader of the Popular Party that currently leads in polling, as he has tolerated corrupt officials and dealings under his leadership as PM, and
  2. There appears a high likelihood that the political parties will once again not be able to agree to form a viable, strong majority coalition.

Current polls suggest the conservative Popular Party (PP) garners the most support at 29%, followed by the anti-austerity Unidos-Podemos (26%), the Socialists (PSOE) at 20.5%, and the liberal Ciudadanos party with 14.5%. As our special economics contributor and Spanish national Daniel Lacalle (who will appear on tomorrow’s Macro Show) has also highlighted in his research, the risks for the coalition appear as follows:

  • The vast majority of Spanish citizens will vote for moderate, center parties (PP, PSOE, and Ciudadanos)
  • Neither (PP + Ciudadanos) nor (PSOE + Podemos) will reach a clear majority
  • A Grand Coalition (PP + PSOE + Ciudadanos) appears unlikely to form

Will this time be different?  We suspect the answer is no, and therefore another hung parliament is likely. And so this political instability should lead to more economic instability and further support our #EuropeSlowing macro theme.

 

Our immediate-term risk ranges (with intermediate-term TREND research view in brackets) are now as follows:

 

UST 10yr Yield 1.55-1.75% (bearish)

SPX 2058-2105 (bearish)
RUT 1125-1170 (bearish)

NASDAQ 4 (bearish)

Nikkei 157 (bearish)

DAX 91 (bearish)

VIX 16.38-23.06 (bullish)
USD 93.13-94.88 (bullish)
EUR/USD 1.11-1.14 (bearish)
YEN 103.08-106.60 (bullish)
Oil (WTI) 46.18-50.72 (bullish)

Nat Gas 2.45-2.82 (bullish)

Gold 1 (bullish)
Copper 2.01-2.16 (bearish)


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 80.45%
  • SHORT SIGNALS 78.38%
next