CLIENT TALKING POINTS
Rates
On the heels of the worst US ISM Services report in 104 months (since 2010), rates got spanked and anything that looked like a bond and/or inverse USD correlation ramped; 2yr Yield down -13% (from 0.84% to 0.73%) in less than a week as markets tell Yellen she has to pivot back to dovish on the data (her 6th hawkish/dovish pivot in 8-9 months).
Yen
US #GrowthSlowing data = Down Dollar, Up Yen – wow was that a fun trade; we're long Yen (for a trade) as everything dovish/hawkish happens on the margin and it looks like the Japanese have some dissent at the BOJ in going for a big devaluation here in SEP (they also need to wait to see what the Fed does); risk range JPY/USD = 99.80-104.38.
Oil
Squeeze me please me, and find me any reason why – but w/ an immediate-term inverse correlation of -0.7 on Oil/USD, all we just did here was bounce within the $42.77-45.90 risk range; our Energy Policy analyst and I have 3 mins (video) on why we don’t buy into the alleged “freeze” here: https://app.hedgeye.com/feed_items/53592-mcmonigle-no-opec-freeze-without-iran.
TOP LONG IDEAS
GLD
See updates below.
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 | |
|---|---|---|---|---|---|---|
| 9/6/16 | 44% | 7% | 8% | 14% | 21% | 6% |
| 9/7/16 | 58% | 4% | 4% | 7% | 23% | 4% |
Asset Allocation as a % of Max Preferred Exposure
| CASH | US EQUITIES | INTL EQUITIES | COMMODITIES | FIXED INCOME | INTL CURRENCIES | |
|---|---|---|---|---|---|---|
| 9/6/16 | 44% | 21% | 24% | 42% | 64% | 18% |
| 9/7/16 | 58% | 12% | 12% | 21% | 70% | 12% |
THREE FOR THE ROAD
TWEET OF THE DAY
S&P tags 251 "troubled" companies, 25% in energy sector pic.twitter.com/sHuFmFQS31
dty
QUOTE OF THE DAY
“I think a hero is an ordinary individual who finds strength to persevere and endure in spite of overwhelming obstacles.”
–Christopher Reeve
STAT OF THE DAY
Aaron Jones of UTEP leads the NCAA in rushing with 249 yards. Nick Chubb of Georgia is second with 222 yards.
