CLIENT TALKING POINTS
Flows
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.
Spain
The tangled mess that is Spanish politics continues to evolve. The latest… Acting PM Rajoy has called a confidence vote for August 31st. While he may get the support of centrist party Ciudadanos, it appears he’d need the Socialist Party (PSOE) to abstain from the vote to win – and the Socialists say they will not abstain! Our call for #EuropeImploding remains intact.
Russia
German Chancellor Angela Merkel said there is no reason to lift EU sanctions against Russia as Moscow has not fulfilled all of its commitments under the Minsk peace plan. Expect political risk to remain heightened as the East vs West faceoff remains!
TOP LONG IDEAS
GLD
See update on TLT below.
TLT
Eurozone GDP, reported Friday, signaled more of the same, stagnation. With that being said there were small but marginal Euro tailwinds against a U.S. retail sales report and PPI release that was likely dovish on the margin (USD -~20bps on Friday and -~60bps on the week).
In line with our #EuropeSlowing theme, Q2 preliminary GDP slowed across the Eurozone to +0.3% vs. +0.6% in the prior quarter and +1.6% Y/Y for Q2 which was flat on a rate of change basis from Q1.
Looking at specific country results:
- German (0.4% vs 0.7% sequentially) GDP accelerated to +1.8% Y/Y from +1.6% which was probably a minor Euro FX tailwind
- Italian GDP came in at +0.7% Y/Y which was a deceleration from +1.0% in Q1
- Greece GDP accelerated to contraction again, printing a measly -0.1% Y/Y from -1.3% in Q1
The Southern Eurozone states continue to implode.
UUP
Recall that a strong retail sales report for June, driven by a positive trend in goods consumption, was a large contributor to our GDP revision for Q2. The headline number, for June, was up +0.6% sequentially with the sequential acceleration in the control group accelerating +7.2% (annualized).
Friday’s retail sales report was a different story, and probably a dovish data point for the USD on the margin :
- The control group printed flat sequentially, +0.0%
- Retail sales ex. auto and gas printed -0.3% sequentially
Next to retail sales, July headline producer prices decelerated -0.4% vs. +0.5% in June sequentially and -0.2% Y/Y vs. +0.3% Y/Y in June. PPI ex. food and energy came in at 0.0% sequentially vs. +0.4% in June and +0.7% Y/Y from +1.3% in June. #Deflation
Asset Allocation
| CASH | US EQUITIES | INTL EQUITIES | COMMODITIES | FIXED INCOME | INTL CURRENCIES | |
|---|---|---|---|---|---|---|
| 8/18/16 | 54% | 3% | 3% | 10% | 18% | 12% |
| 8/19/16 | 54% | 3% | 3% | 10% | 18% | 12% |
Asset Allocation as a % of Max Preferred Exposure
| CASH | US EQUITIES | INTL EQUITIES | COMMODITIES | FIXED INCOME | INTL CURRENCIES | |
|---|---|---|---|---|---|---|
| 8/18/16 | 54% | 9% | 9% | 30% | 55% | 36% |
| 8/19/16 | 54% | 9% | 9% | 30% | 55% | 36% |
THREE FOR THE ROAD
TWEET OF THE DAY
Cartoon of the Day: All Aboard? app.hedgeye.com/insights/53201… cc @KeithMcCullough $SPY $QQQ $DJIA #Stocks pic.twitter.com/SvAvk8Ggi7
@Hedgeye
QUOTE OF THE DAY
“A man may die, nations may rise and fall, but an idea lives on. Ideas have endurance without death.”
-John F. Kennedy
STAT OF THE DAY
Tom Brady has 428 touhcdowns in the NFL heading into this season.
