• run with the bulls

    get your first month


    of hedgeye free

prev

CHART OF THE DAY: Janet Yellen's Favorite Indicator (Is Red)

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

 

Doesn’t this set up nicely for another positive “surprise” by Janet to pivot back to dovish, right before the election? As you can see in the Chart of The Day (her former “favorite” indicator – the Change In Labor Market Conditions Index), it’s very red.

 

And, again, on Friday so was what’s become her new fav indicator – the stock market. Very very, you-gely, red.

 

CHART OF THE DAY: Janet Yellen's Favorite Indicator (Is Red) - el 09.12.16 EL Chart


Hiking Tip

“Remember, if you get lost in the woods.. stay where you are.”

-Hiking Tip

 

Worried about the Fed hiking into a slow-down again? No worries. Of all the data driven dovish catalysts in 2016, a rate hike now would be the most dovish of all. So stay the course with your #GrowthSlowing positioning.

 

Dovish? Uh, yeah. Did you see what stocks, bonds, and commodities did on a Fed voter (Rosengren) ramping his rate hike rhetoric on Friday? How about eviscerating all the no-volume “gains” of the SPY’s summer on a +46.5% volatility (VIX) spike?

 

Notwithstanding that Eric Rosengren has been crushing it at the Fed since 1985, remember that he has little to no credibility on forecasting. If his “data dependent” path is really SP500 dependent, boy did he go dovish over the weekend!

 

Back to the Global Macro Grind

 

Interestingly, but not surprisingly, post the pop in Fed Fund Futures from 20% to 34% (on the probability of a SEP hike), that probability has actually dropped back down to 30% this morning. That’s why I’m staying where I am, long Gold and Bonds.

 

Hiking Tip - Gold Bond cartoon 07.10.2014

 

Heck, even my friends at Cornerstone have realized that “the composite PMIs suggest global growth is now clearly slowing” at this stage of what’s clearly been super #LateCycle. If you have friends who’ve missed being long bonds, here’s their last chance.

 

That’s right. Don’t forget where the performance in 2016 has really been:

 

  1. Long Bond Proxy (TLT) +12.4% YTD vs. SP500 +4.1%
  2. Gold up +0.6% in a sea of stock/bond red last week to +25.4% YTD
  3. Utilities (XLU) +11.97% vs. Financials (XLF) +0.88% YTD

 

I know it’s a little unnerving to think about buying bonds (and safe-yield stocks that look like bonds) into a potential policy mistake. But that’s precisely what you should have done on the day that Yellen raised rates in December.

 

So why wouldn’t you stay where you are ahead of more US #GrowthSlowing data this week?

 

  1. Producer Prices (PPI) will be released on THUR alongside slowing Retail Sales and recessionary Industrial Production
  2. Consumer Prices (CPI) will be released on FRI alongside consumer confidence which recently hit a 4 month low

 

Doesn’t this set up nicely for another positive “surprise” by Janet to pivot back to dovish, right before the election? As you can see in the Chart of The Day (her former “favorite” indicator – the Change In Labor Market Conditions Index), it’s very red.

 

And, again, on Friday so was what’s become her new fav indicator – the stock market. Very very, you-gely, red.

 

As we’d been highlighting throughout the thralls of the summer, positioning into this recent Fed pivot to “hawkish” (their 6th hawkish/dovish pivot in 8 months) was that everyone was pretty much long everything.

 

Into this correction, both stocks and bonds have seen their net LONG positions correct:

 

  1. SP500 (Index + Emini) net LONG position down to +193,281 contracts last week = 1.79x (1yr z-score)
  2. 10YR Treasuries net LONG position = +128,954 contracts = 1.75x (1yr z-score)
  3. Oil’s net LONG position down -47,733 contracts last week = +0.27x (1yr z-score)
  4. Gold’s net LONG position up +40,842 contracts last week = +1.40x (1yr z-score)
  5. US Dollar’s net LONG position up small last week to +16,834 = -0.69x (1yr z-score)

 

In other words, most of Wall Street was positioned with the #GrowthSlowing data for a Dollar Down, Rates Down, Stocks Up scenario… and Rosengren messed things up, momentarily, on Friday. So now Yellen needs to come to the rhetorical rescue.

 

I’m not saying it’s up, up, and away for everything in the #GrowthSlowing Bubble (everyone’s long everything already). I’m just reminding you that any time you’ve been lost on this ‘hike or no hike’ expedition, staying where we’ve been has paid.

 

Our immediate-term Global Macro Risk Ranges are now:

 

UST 10yr Yield 1.51-1.70%

SPX 2115-2170

VIX 13.01-18.17
USD 94.40-96.50
Oil (WTI) 42.79-48.01

Gold 1

 

Best of luck out there this week,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Hiking Tip - el 09.12.16 EL Chart


EVENT | Whole Foods (WFM) Black Book

Thursday, September 15th at 1:00PM ET

Watch live below.

CLICK HERE to access the associated slides.

CLICK HERE to access the audio-only replay.


the macro show

what smart investors watch to win

Hosted by Hedgeye CEO Keith McCullough at 9:00am ET, this special online broadcast offers smart investors and traders of all stripes the sharpest insights and clearest market analysis available on Wall Street.

PREMIUM INSIGHT

REPLAY Special Free Edition of The Macro Show: Beware the Bubble

REPLAY Special Free Edition of The Macro Show: Beware the Bubble - z xq

Did you miss it? Hedgeye CEO Keith McCullough went live (for free) this morning on The Macro Show. It was a no-punches pulled look into why “this is one of the top-3 stock market bubbles in history.” He opened up the discussion during interactive Q&A with viewers.


The Macro Show with Keith McCullough Replay | September 12, 2016

CLICK HERE to access the associated slides.

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

 


JT TAYLOR: PRESIDENTIAL ELECTION OUTLOOK - STATE OF PLAY

PRESIDENTIAL ELECTION OUTLOOK

STATE OF PLAY

 

Over the next two months, we will be highlighting key states in the presidential election by issuing scorecards, trends, notes, and other relevant information. To start, we take a deep dive into some of the most vital battleground states, the Rust Belt states.

 

PENNSYLVANIA

 

PA has 20 electoral votes, making up 7.4% of the 270 needed to win the general election – that’s a sizable number when it comes down to it.

 

Between 1900 and 2012, PA voted for the winning presidential candidate 76% of the time, and in that same time frame, supported Republican candidates for president more often than Democratic candidates. However, between 1992 and 2012, PA has favored Democrats in every presidential election.

 

Hillary Clinton and Donald Trump both won the PA primary by a sizeable margins, but in the general election race, the state is tilting in Clinton’s direction.

 

JT TAYLOR: PRESIDENTIAL ELECTION OUTLOOK - STATE OF PLAY - PA

 

OHIO

 

OH has 18 electoral votes, making up 6.6% of the 270 needed to win the general election.

 

Between 1900 and 2012, OH cast votes for the winning presidential candidate 93% of the time, more than any other state in the country. The state has favored Republicans and Democrats equally between 2000 and 2012, with Republican George W. Bush winning in 2000 and 2004 and Democrat Barack Obama winning in 2008 and 2012.

 

Though the narrowness of past races is reflected this year as well, it's not a given that OH voters will buck their recent trend and choose Clinton as the next president.

 

JT TAYLOR: PRESIDENTIAL ELECTION OUTLOOK - STATE OF PLAY - OHIO

 

MICHIGAN

 

MI has 16 electoral votes, making up 6% of the 270 needed to win the general election.

 

Between 1900 and 2012, Michigan cast votes for the winning presidential candidate 72% of the time, supporting more Republican candidates for presidents than Democrats – though Democrat Barack Obama won the state in 2012

 

Clinton and running mate, Tim Kaine, have made MI a priority stop on their campaign trail – they presented an economic agenda in a MI manufacturing plant. Clinton’s recent trip and beefed up campaign activity has helped grow her lead by a substantial margin in this Rust Belt state, and she is poised to sustain that lead over the next two months.

 

JT TAYLOR: PRESIDENTIAL ELECTION OUTLOOK - STATE OF PLAY - MI


investing ideas

Risk Managed Long Term Investing for Pros

Hedgeye CEO Keith McCullough handpicks the “best of the best” long and short ideas delivered to him by our team of over 30 research analysts across myriad sectors.

next