CLIENT TALKING POINTS
USD
Not that anyone is short-term these days, but with the Fed Funds Futures at 32% on SEP, markets are betting on Yellen pivoting for the 6th time in 8 months – Down Dollar has a -0.5-0.9 (2-week) inverse correlation with SPY-CRB Index.
Rates
Interesting move here; on a week-over-week basis both 2yr and 10yr yields ended up down -6bps and -3bps, respectively; JGB 10yr +2bps to -0.03% this am on BOJ commentary of not making a move until they see what the Fed does; tightening into a slow-down and/or when Fed Funds aren’t pricing it as probable would be super interesting.
Gold
Still one of the easiest macro long positions to stay with at this stage of the FX War as Japan, Europe, and the USA all try to out-ease one another; Gold +0.2% last wk and another +0.3% this am to +25.4% YTD (it’s a currency too).
TOP LONG IDEAS
GLD
See update above.
TLT
Income & Consumption
Slowing employment growth + a decline hours worked + deceleration in earnings growth will = a deceleration in aggregate income growth when the official data are reported at the end of the month. Absent a significant decline in the savings rate and/or significant re-acceleration in credit growth, consumption growth can be expected to track income growth lower.
UUP
Industrial Activity
The -14K decline in manufacturing employment in August accords with the retreat in the employment subcomponent in the ISM manufacturing report. Lower manufacturing employment and a slowdown in manufacturing hours worked also points to a sequential decline in Industrial Production when that data is reported later in the month. In short (and in the short-term), bad economic data is good as falling rate hike expectations support asset price inflation. Over the intermediate-term, "slower-and-lower-for-longer" continues to characterize the growth, inflation and interest rate outlook and support #GrowthSlowing allocations in bonds, gold, and dollars. While incremental dovishness from the Fed may serve as a short-term headwind to the dollar, the structural case for the $USD amidst ongoing policy divergence between the U.S. and the balance of global DM markets remains intact.
Asset Allocation
| CASH | US EQUITIES | INTL EQUITIES | COMMODITIES | FIXED INCOME | INTL CURRENCIES | |
|---|---|---|---|---|---|---|
| 9/5/16 | 42% | 8% | 8% | 15% | 21% | 6% |
| 9/6/16 | 44% | 7% | 8% | 14% | 21% | 6% |
Asset Allocation as a % of Max Preferred Exposure
| CASH | US EQUITIES | INTL EQUITIES | COMMODITIES | FIXED INCOME | INTL CURRENCIES | |
|---|---|---|---|---|---|---|
| 9/5/16 | 42% | 24% | 24% | 45% | 64% | 18% |
| 9/6/16 | 44% | 21% | 24% | 42% | 64% | 18% |
THREE FOR THE ROAD
TWEET OF THE DAY
It's (very) unlikely #Fed raises rates before #Election2016. Here's why via @KeithMcCullough app.hedgeye.com/insights/53519… pic.twitter.com/MqiFTA1rE6
@Hedgeye
QUOTE OF THE DAY
“The old in the new is what claims the attention.”
-William James
STAT OF THE DAY
Mike White of Western Kentucky leads the NCAA in passing with 517 yards.
