CLIENT TALKING POINTS

Europe

After signaling immediate-term TRADE overbought last week, both the EuroStoxx50 (-1.1%) and German DAX (-1.3%) are signaling immediate-term TRADE oversold this morning; we remain bearish on both Japanese and European Equities, but surviving the bear-chop means you have to trade it, both ways.

Gold

There have been plenty “buying opportunities” (why is it that they never call them that in the Long Bond or Gold?) this year Gold – yesterday was one of them as we tapped the low-end of my immediate-term risk range = $1; anything that’s not hawkish from Janet should be bearish for Bond Yields; bullish for Gold and Platinum.

Healthcare

Does Hillary scare you? She does have the ability to scare this sector! Sector ETF (XLV) signaled immediate-term TRADE oversold yesterday too; fundamentally, we haven’t liked it all year long (Tom Tobin is bearish)… but from a policy risk perspective, our Healthcare Policy analyst, Emily Evans, thinks Big Pharma’s lobby trumps Hillary rhetoric, in the end.

TOP LONG IDEAS

GLD

GLD

See update on TLT below.

TLT

TLT

#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

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). #Deflation  

Asset Allocation

CASH US EQUITIES INTL EQUITIES COMMODITIES FIXED INCOME INTL CURRENCIES
8/24/16 52% 3% 5% 12% 16% 12%
8/25/16 50% 3% 5% 14% 18% 10%

Asset Allocation as a % of Max Preferred Exposure

CASH US EQUITIES INTL EQUITIES COMMODITIES FIXED INCOME INTL CURRENCIES
8/24/16 52% 9% 15% 36% 48% 36%
8/25/16 50% 9% 15% 42% 55% 30%
The maximum preferred exposure for cash is 100%. The maximum preferred exposure for each of the other assets classes is 33%.

THREE FOR THE ROAD

TWEET OF THE DAY

Cartoon of the Day: Freezing? app.hedgeye.com/insights/53324… cc @JoeMcMonigle @KeithMcCullough #Oil #OPEC #WTI pic.twitter.com/tUh4O2WMq0

@Hedgeye

QUOTE OF THE DAY

“Without continual growth and progress, such words as improvement, achievement, and success have no meaning.”

– Benjamin Franklin

STAT OF THE DAY

David Ortiz is batting .322 in his final year in the MLB.