Capital Brief | Election 2016: Fasten Your Seat Belts People

Takeaway: Mail Call; Scorched Earth Policy; Fish Or Cut Bait

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


Capital Brief | Election 2016: Fasten Your Seat Belts People - JT   Potomac under 1 mb


Inboxes on Capitol Hill are full of unread Clinton emails having received the Clinton-FBI interview notes. The Republican caucus is now sifting through pages of detailed summaries, inspecting every nook and cranny for a smoking gun. You could see this coming from a mile away - it’s an election year and Republicans are slipping and have little to show on the accomplishment front for the past seven months. No new findings are expected, but the House Judiciary Committee plans to press the FBI in next month on allegations that Clinton committed perjury. As we’ve seen in the past, Republicans do have a tendency to overextend, and while it truly does deserve a vetting, let’s hope it doesn’t supplant the duties of Congress (pass a budget).


Freshly-minted Campaign Chair Steve Bannon’s mission is almost perfectly aligned with Trump’s – he’s a rabid fighter, enraged by Washington and Wall Street insiders, the Republican establishment and the Clintons. Known as a devil-may-care conservative, Bannon’s populist and nationalist sympathies reflect his longstanding disgust with both major political parties, which perfectly outlines his overall objective - disrupt the narrative. Bannon has been floating around the campaign for a while now, and is expected to be an expansion of Trump’s mind and values. With the Republican party also in his crosshairs, the Trump campaign may widen the gap between themselves and the party, and run their campaign however they may choose.


Usually a campaign shakeup this late in the game shows a struggling candidate righting the ship, but not here - more Trump is expected, and the move is irking Republicans. A letter, signed by more than 120 Republicans, warned the RNC that Trump is a threat to House and Senate seats, and the RNC should refocus resources to down-ballot races instead. The RNC is standing by Trump…for now, and won't make a decision until the fall. Not wasting any time, Republican PACs are investing heavily in down ticket races, while ignoring the presidential campaign. With the final leg of the election kicking off after Labor Day weekend, the RNC will need to make a final decision – keep him or toss him back in the water. Either way, the party is likely to feel the repercussions for cycles to come.

Daily Market Data Dump: Friday

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, rates and bond spreads, key currency crosses, and commodities. 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




Daily Market Data Dump: Friday - equity markets 8 19


Daily Market Data Dump: Friday - sector performance 8 19


Daily Market Data Dump: Friday - volume 8 19


Daily Market Data Dump: Friday - rates and spreads 8 19


Daily Market Data Dump: Friday - currencies 8 19


Daily Market Data Dump: Friday - commodities 8 19

The War On Active Management - Part 2

Takeaway: Lipper is reporting another -$4B in outflows from U.S. equity mutual funds while passive equity funds took in another +$4.3B WoW.

The war on active management continues with U.S. equity beta trouncing most strategies YTD.


This morning, Lipper is reporting another -$4B in outflows from U.S. equity mutual funds while passive equity funds took in another +$4.3B WoW. We’ve written extensively about the upside capitulation we’re seeing in the SPX futures and options data and via the reversal in style factor performance – which itself reeks of a massive career-risk driven chase.


With high beta stocks up +19% and Utes down -30bps since the June 27th Brexit v-bottom, we’re again starting to see opportunity on the long side of lower-for-longer strategies for those investors who’ve missed the big move.


Take a look at the style factor breakdown below:




***Editor's Note: The snippet above is from a note written by our Macro team and sent to subscribers this morning. Click here to learn more.

Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.

CHART OF THE DAY: Doh! A Closer Look At Faulty Fed Forecasts

Editor's Note: Below is a brief excerpt and chart from today's Early Look written by Hedgeye Director of Research Daryl Jones. Click here to learn more. 


"... In the Chart of the Day, we show the course of Federal Reserve GDP projections over the course of the last years. As the chart shows, they have been down and to the right. For those newish to reading charts, that means that growth has been gradually slowing and so the Fed's projections have been coming in."


CHART OF THE DAY: Doh! A Closer Look At Faulty Fed Forecasts - 2 dj

Cartoon of the Day: All Aboard?

Cartoon of the Day: All Aboard? - Stocks Titanic cartoon 08.18.2016


Did you buy the all-time highs in U.S. equity markets?


Click here to receive our daily cartoon for free.

The BS Filter: Fed Following (& Other Nonsense)

Takeaway: Here's our take on some of today's top financial stories.

The BS Filter: Fed Following (& Other Nonsense) - Fed cartoon 01.11.2015


The Fed kicked off an action packed week of central planning with the release of its minutes and the regional Fed presidents trotted out any number of strange narratives. Here are a few.

New York Fed President Bill Dudley (8/18/2016):

"Let's imagine that the third quarter has very very strong productivity growth, accompanied by weak gains in payroll and employment... Well then you probably would not put much weight at all on the strength of GDP. At the end of the day, how the GDP growth translates in terms of employment gains is probably the more important element."


OUR TAKE: So Dudley wants us pay attention to the jobs market. Well, jobs growth put in its year-over-year peak in February 2015. It's been declining ever since.


The BS Filter: Fed Following (& Other Nonsense) - nfp 8 5

St. Louis Fed President James Bullard (8/17/2016):

In a presentation entitled “Normalization: A New Approach” today during the Wealth and Asset Management Research Conference at Washington University in St. Louis, Bullard said rates should remain flat over the next two and a half years. “If there are no major shocks to the economy, this situation could be sustained over a forecasting horizon of two and a half years," he said. "These facts suggest that it may be time to quit using the old narrative.” 



Atlanta Fed President Dennis Lockhart (8/16/2016):

“I’m not locked in to any policy position at this stage, but if my confidence in the economy proves to be justified, I think at least one increase of the policy rate could be appropriate later this year,” Lockhart said. "Early indications of third-quarter GDP growth suggest a rebound. I don't believe momentum has stalled. I remain confident about prospects in the second half of 2016 and 2017."


OUR TAKE: U.S. growth has slowed from 3-2-1%. What makes him so sure growth will accelerate. 

san Francisco Fed President John Williams (8/15/2016):

"There is simply not enough room for central banks to cut interest rates in response to an economic downturn when both natural rates and inflation are very low," Williams said in the latest issue of his regional Fed bank's Economic Letter on Monday. There are “limits to what monetary policy can and indeed, should do... the burden must also fall on fiscal policy do to its part."


OUR TAKE: Williams was calling for up to 5 rate hikes in 2016. Now he says we need fiscal policy because U.S. economic growth is sluggish. Thanks for coming out.

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