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Daily Market Data Dump: Monday

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

 

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Daily Market Data Dump: Monday - equity markets 8 29

 

Daily Market Data Dump: Monday - sector performance 8 29

 

Daily Market Data Dump: Monday - volume 8 29

 

Daily Market Data Dump: Monday - rates and spreads 8 29

 

Daily Market Data Dump: Monday - currencies 8 29

 

Daily Market Data Dump: Monday - commodities 8 29


Hawkish-dovish-hawkish-dovish-hawkish...Get ready for another pivot?

Client Talking Points

US Dollar

USD likes the hawkish pivot (+1.1% last wk) but Yellen and Fischer were already there post the last US jobs report – so what happens to USD this week if the jobs report is bad? That’s right. Asset reflation needs a bad jobs report now… and anyone following this hawkish-dovish clown show gets that.

US 10YR

Yield ramped right back to the top-end of my immediate-term 1.50-1.62% risk range, but now what? Hate to remind Long Bond Bears about this, but the last hike into a slow-down (the hawkish pivot in DEC) was THE catalyst for both Deflation’s Dominoes and rates to crash (and the Fed to go back to dovish again).

Stocks

Dollar Up, Yen Down (Pound Down) = Nikkei and FTSE Up! Nikkei +2.3% overnight so the Japanese Gov Pension Fund loves the idea of Yellen making another policy mistake whereas the Australians (-0.8% All Ords overnight) and Russians (RTSI -1.7% this am) loathe its commodity deflation implications.

Asset Allocation

CASH US EQUITIES INTL EQUITIES COMMODITIES FIXED INCOME INTL CURRENCIES
8/28/16 50% 3% 5% 14% 18% 10%
8/29/16 43% 7% 7% 15% 22% 6%

Asset Allocation as a % of Max Preferred Exposure

CASH US EQUITIES INTL EQUITIES COMMODITIES FIXED INCOME INTL CURRENCIES
8/28/16 50% 9% 15% 42% 55% 30%
8/29/16 43% 21% 21% 45% 67% 18%
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
GLD

On the other side of the USD expectation, Gold (GLD) lost -1.5% w/w. Again we still like UUP and GLD as a basket against other centrally-planned currency regimes elsewhere.

TLT

Long Bonds (TLT), which has been on Investing Ideas since August 4th, 2014, finished the week -0.25%. We continue to believe that growth is the main catalyst for the curve amidst all the central planning noise. Slower growth gets discounted in a flatter curve so even if rates are hiked into a late cycle slow-down, the yield curve pancakes (the long-end of the yield curve fall and the short-end goes up). 

UUP

Strength in the U.S. dollar, with renewed rate hike expectations back in the mix over the last few weeks, gave a good boost to U.S. Dollar (UUP) which finished +1.1% on the week. The bid-yield of December Federal funds futures has ticked 10 bps higher in August to 0.55% to close out the week.

Three for the Road

TWEET OF THE DAY

CHART OF THE DAY: Fed-Induced Hawkish Hyperventilation app.hedgeye.com/insights/53404… via @KeithMcCullough #Fed #Yellen

@Hedgeye

QUOTE OF THE DAY

Strength does not come from winning. Your struggles develop your strengths. When you go through hardships and decide not to surrender, that is strength. 
-Arnold Schwarzenegger

STAT OF THE DAY

Otis Nixon batted .270 over his 17 year career.


'I Hate To Remind Long Bond Bears About This But...'

Takeaway: Does Wall Street need the data to worsen, from here, to really get paid?

I guess, provided that you’re always fading the Fed’s forecasts, you can make money as a Long Bond Bull for longer too.

 

If you’re still keeping score, it’s hawkish (DEC), dovish (MAR), hawkish (MAY), dovish (JUN), hawkish (AUG). That’s right. You go girl! Janet has had 5 policy pivots in 7 months – and she’s one bad jobs report away from her 6th in 8.

 

Totally cool. Totally manageable. As long as GDP stays around 1%, 90% of Housing doesn’t slow more than -1.6% year-over-year, and Consumer Confidence doesn’t fall much from 4-month lows, right? Or do we need the data to worsen, from here, to really get paid?

 

The 10yr Treasury yield ramped right back to the top-end of my immediate-term 1.50-1.62% risk range, but now what? I hate to remind Long Bond Bears about this, but the last hike into a slow-down (the hawkish pivot in DEC) was THE catalyst for both Deflation’s Dominoes and rates to crash (and the Fed to go back to dovish again)

 

 

Editor's Note: The snippet above is from a note written by Hedgeye CEO Keith McCullough and sent to subscribers this morning. Click here to learn more. 


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CHART OF THE DAY: Fed-Induced Hawkish Hyperventilation

Editor's Note: Below is a brief excerpt and chart from today's Early Look written by Hedgeye CEO Keith McCullough. Click here to learn more.

 

"... The Fed has “clearly seen improvements for the last 2 months?” Or were those the politically prepared remarks pre the SP500 (you-ge indicator!) going down for 5 of the last 6 trading days and US Equity Volatility (VIX) ramping +20.4% in a week?"

 

CHART OF THE DAY: Fed-Induced Hawkish Hyperventilation - 08.29.16 chart


Hawkish Hyperventilation

“If you hyperventilate, you can hold your breath underwater longer.”

#Fact

 

I guess, provided that you’re always fading the Fed’s forecasts, you can make money as a Long Bond Bull for longer too.

 

If you’re still keeping score, it’s hawkish (DEC), dovish (MAR), hawkish (MAY), dovish (JUN), hawkish (AUG). That’s right. You go girl! Janet has had 5 policy pivots in 7 months – and she’s one bad jobs report away from her 6th in 8.

 

Totally cool. Totally manageable. As long as GDP stays around 1%, 90% of Housing doesn’t slow more than -1.2% year-over-year, and Consumer Confidence doesn’t fall much from 4 month lows, right? Or do we need the data to worsen, from here, to really get paid?

 

Hawkish Hyperventilation - Rate hike cartoon 11.30.2015

 

Back to the Global Macro Grind

 

Yep. Memories are short on what happened last time the Federal Reserve tightened into a slow-down (DEC). That said, I’m thinking the government should just make up a nasty jobs report on Friday just to get the SEP bull market narrative (stocks and bonds) back on track.

 

The government, unlike the Fed, is actually elected. And since it’s an election year, why not work the numbers a little more aggressively like they did the GDP Deflator, understating inflation (and overstating US growth at 1%) in Q1? Ex-profits, no recession as a result. Phew!

 

As long as “stocks” are going up, this is totally manageable. The narrative, that is. If Obama needs some advisory services on things like month-end and stuff, maybe he should give my boy Bill Ackman a buzz. Did you see what he tried with Herbalife (HLF) on Friday? lol

 

In all seriousness. This is getting serious.

 

Fed Funds futures on a SEP and DEC hike probabilities just popped back up to 42% and 65%, respectively. Before the double-hawkish pivot from Fischer that was confused by Yellen, those probabilities were 32% and 57%, respectively, early last week.

 

I actually agree with 32% being around the right number as there’s a better than 2/3rds chance that US GDP growth continues to slow in Q3 and that the rate of change in non-farm payroll growth continues to slow in the coming months as well.

 

What you do with that from a macro markets perspective is pretty much the same thing we’ve been telling you to do since the US economic cycle peaked in Q2 of 2015. Buy long-term bonds, Gold, and stocks that look like bonds as you fade Fed forecasts.

 

That is not what macro markets did last week:

 

  1. US DOLLAR was UP +1.1% to -3.1% YTD
  2. COMMODITIES (CRB Index) were DOWN -1.4% to +5.7% YTD
  3. OIL was DOWN -3.0% to +11.1% YTD
  4. GOLD was DOWN -1.5% to +24.5% YTD
  5. COPPER was DOWN -4.3% to -3.3% YTD
  6. US STOCKS (SP500) were DOWN -0.7% to +6.1% YTD
  7. UTILITIES (XLU) were DOWN -2.2% to +13.6% YTD
  8. FINANCIALS (XLF) were UP +0.4% to +1.2% YTD
  9. 2YR TREASURY Yield was UP +10bps to -20bps YTD
  10. 10YR TREASURY Yield was UP +5bps to -64bps YTD

 

That’s right, hawkish hyperventilation fully loaded, the US 10yr Treasury Yield only moved 5 basis points (week-over-week) because it had been moving passive aggressively higher since the last “everything is awesome” US jobs report at the beginning of the month.

 

Up 5 or down 64. What has the real growth of the US economy looked like (in rate of change terms) in 2016? Relative to Fed expectations of “5 or 6 hikes”, I’d say the current 1.1% US GDP print looks like down 98. That was (in basis points) the YTD low for the 10yr yield.

 

Oh, you want to go Ex-GDP and go for another hike because “inflation is reaching the target” do you? Cool. In addition to commodity-linked inflation proxies getting deflated last week, the 5yr US Treasury Break-Even rate dropped 2 basis points on the week to 1.34%.

 

In other words, with:

 

A) GDP tracking towards 1.1% in Q3 (we’ll get that print right before the election)

B) Housing and Consumer Confidence rolling off their #LateCycle peaks

C) Inflation pressures deflating from their Down Dollar YTD highs

D) Yield Spread (UST 10yr minus 2yr) at its YTD low (down 5bps last week)

E) SP500 dead flat now vs. 1 month ago today

 

The Fed has “clearly seen improvements for the last 2 months?” Or were those the politically prepared remarks pre the SP500 (you-ge indicator!) going down for 5 of the last 6 trading days and US Equity Volatility (VIX) ramping +20.4% in a week?

 

The only thing that’s crystal clear to me at this point is that A) the US GDP growth cycle peaked in mid-2015, B) inflation has had what the Fed should call “transitory” reflation, and C) the labor cycle continues to slow from its 2015 rate of change cycle peak.

 

If that means that Janet Yellen wants to make you hyperventilate every other month as she pivots from hoping-to-be-hawkish back to dovish (when labor data slows), you can keep holding your breath because it’s mathematically impossible for labor to accelerate in Q3.

 

Our immediate-term Global Macro Risk Ranges are now:

 

UST 10yr Yield 1.50-1.63%

SPX 2162-2190

VIX 11.95-15.03
USD 93.99-96.25
Oil (WTI) 44.01-49.03

Gold 1311-1365

 

Best of luck out there this week,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Hawkish Hyperventilation - 08.29.16 chart


The Macro Show with Keith McCullough Replay | August, 29 2016

CLICK HERE to access the assosciated slides. 

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


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