CLIENT TALKING POINTS
UK
Doesn’t take much of a “growth scare” (1 data point) to get bond yields up – 10yr Gilt +6bps to 0.70% and GBP/USD +0.8% to the top-end of it’s immediate-term risk range on a UK PMI print of 53.3 for AUG vs. 48.2 (we'd fade the macro move).
Oil
Awful end to the month for pretty much everything commodities but both the CRB Index and WTI are signaling immediate-term TRADE oversold at 179 and $44.09, respectively. Good luck with your Fed Hike Powerball tickets tomorrow.
USA
“Markets can handle 25 bps” (heard in DEC 2015 and AUG 2016)– in other news SP500 closed down -0.12% in AUG after having 7 down days in the last 9 on rate hike fears; can markets handle another hike into a slow-down? Perversely, best case for stocks/bonds is a slightly worse jobs print (no hike) - gotta love super #LateCycle labor data.
TOP LONG IDEAS
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.
Asset Allocation
| CASH | US EQUITIES | INTL EQUITIES | COMMODITIES | FIXED INCOME | INTL CURRENCIES | |
|---|---|---|---|---|---|---|
| 8/31/16 | 43% | 7% | 8% | 16% | 20% | 6% |
| 9/1/16 | 42% | 8% | 8% | 16% | 20% | 6% |
Asset Allocation as a % of Max Preferred Exposure
| CASH | US EQUITIES | INTL EQUITIES | COMMODITIES | FIXED INCOME | INTL CURRENCIES | |
|---|---|---|---|---|---|---|
| 8/31/16 | 43% | 21% | 24% | 48% | 61% | 18% |
| 9/1/16 | 42% | 24% | 24% | 48% | 61% | 18% |
THREE FOR THE ROAD
TWEET OF THE DAY
CHART OF THE DAY: Why Most Americans Are FED Up app.hedgeye.com/insights/53498… via @KeithMcCullough #Fed #Yellen pic.twitter.com/a9Y4GVArak
@Hedgeye
QUOTE OF THE DAY
“Show me a guy who's afraid to look bad, and I'll show you a guy you can beat every time.”
–Lou Brock
STAT OF THE DAY
Mark Trumbo leads the MLB in HR's with 40.
