CLIENT TALKING POINTS
Pound
One way to keep US Equity Beta Up = Dollar Down (on the week); but how does that continue (from here)? With GBP/USD signaling immediate-term TRADE overbought at $1.34 and US economic growth (Q2 GDP) not tracking to recession (our Q2 predictive tracking algo currently has 1.5-1.8% y/y)?
Europe
The other side of the FX (and relative economic slowing) TREND looks like Euro Down (vs. Dollar Up) to us; EUR/USD top-end of the risk range = $1.12, and as European #GrowthSlowing continues, we're looking for a re-test of $1.05; French stocks down -0.8% have the CAC40 out of “crash” mode at -17% from last year’s high, but still bearish TREND @Hedgeye.
Oil
The other former Perma Bull narrative on US Stocks was Oil $60-70… and while you pretty much have to change that Equity Beta Chasing narrative quarterly at this point, it’s still important to remind you that Oil is signaling bearish TREND now ($47.54 resistance WTI) inasmuch as USD is signaling bullish TREND @Hedgeye.
TOP LONG IDEAS
TLT
Last week, we introduced our Q3 Macro Themes: #ProfitCycle, #ConsumerCredit, #EuropeImploding. The gist of themes #1 and #2 emphasize that the economic cycle continues to roll over as evidenced by declining corporate profitability and the pending deceleration in consumer credit growth which is more of a “when” rather than an “if” scenario.
Consumer credit growth has a direct effect on consumption. Employment and consumption peaked on a Y/Y rate of change basis in Q1 2015 right after corporate profits peaked in the second half of 2014.
GLD
We want to be long of continued growth decelerating and inflation picking up from a GIP modeling perspective into the back half of 2016. TIPS are a great way to play both of these views along with our GLD (reflation) and TLT (growth slowing) positions.
TIP
See update on TLT/GLD.
Asset Allocation
| CASH | US EQUITIES | INTL EQUITIES | COMMODITIES | FIXED INCOME | INTL CURRENCIES | |
|---|---|---|---|---|---|---|
| 7/14/16 | 56% | 0% | 0% | 12% | 25% | 7% |
| 7/15/16 | 51% | 0% | 0% | 13% | 30% | 6% |
Asset Allocation as a % of Max Preferred Exposure
| CASH | US EQUITIES | INTL EQUITIES | COMMODITIES | FIXED INCOME | INTL CURRENCIES | |
|---|---|---|---|---|---|---|
| 7/14/16 | 56% | 0% | 0% | 36% | 76% | 21% |
| 7/15/16 | 51% | 0% | 0% | 39% | 91% | 18% |
THREE FOR THE ROAD
TWEET OF THE DAY
OIL: reiterating Long Gold (instead of Oil) as WTI continues to fail @Hedgeye TREND pic.twitter.com/rQ8GiwEHiZ
@KeithMcCullough
QUOTE OF THE DAY
"If you aren't going all the way, why go at all?"
-Joe Namath
STAT OF THE DAY
Joe Namath threw 173 TD's and 215 interceptions for the NYJ.
