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PREMIUM INSIGHT

About Everything | Replay with Neil Howe and Darius Dale - Aging Boomers

About Everything | Replay with Neil Howe and Darius Dale  - Aging Boomers - AE thumbnail

Join us live! Hedgeye Demography Sector Head Neil Howe and Macro analyst Darius Dale will discuss how America's aging Baby Boomers will feed (or starve) a wide range of industries—thanks to their sheer demographic size and generational preferences.


CHART OF THE DAY: Trump Has The Momentum

Editor's Note: Below is an excerpt and chart from today's Early Look written by Hedgeye Director of Research Daryl Jones. Click here to subscribe.

 

There is no denying Trump has the momentum.  Whether it is Clinton’s sickness, a deflating of her post convention bounce, Trump just getting some verbal discipline, or recent miscues of Clinton’s, the poll numbers between the two candidates have narrowed meaningfully over the last month.  The Chart of the Day below highlights this graphically over the last 30 days.

 

CHART OF THE DAY: Trump Has The Momentum - zb 09.14.16 EL Chart


October Surprise

“Trust, but verify.”

 -Ronald Reagan

 

The term “October Surprise” references the potential for a late surprise in the U.S. Presidential election that alters the outcome of the election.  The idea first came into vogue in the 1980 U.S. Presidential election between Jimmy Carter and Ronald Reagan.

 

One of the primary foreign policy issues in that election year was the Iranian hostage crisis that began on November 4th, 1979.  As we all know, Reagan won the election. On the day of his inauguration (some 20 minutes after his inaugural address concluded) the Iranians announced the release of the fifty-two Americans held as hostages.  Coincidence?

 

In the politicized world of Washington, DC, speculation was rampant that Republicans had conspired with Iran to time the hostage release until after the election to make then President Carter look weak.  The supposed "quid pro quo" for the Iranians delaying the release of the hostages was that the Reagan Administration would then reward Iran with weapons and unblock frozen monetary assets.

 

Despite numerous congressional hearings and investigations, no evidence was ever found to substantiate the idea of collusion between Iran and the Republicans, but it certainly made for great newspaper headlines! And thus the conspiracy theory known as the October Surprise was born.

 

October Surprise - z reag

 

Back to the Global Macro Grind...

 

In this election year, the line between conspiracy theory and reality is slowly blurring.  The most recent conspiracy theory that became reality was of course that Hillary Clinton was sick.  Over the last few weeks, conservative leaning websites and Republicans talking heads have floated the idea that she had some serious illness.  By extension, they went on to question her capability to serve as commander-in-chief.

 

Well, it turns out that Clinton actually is sick with pneumonia, although she was diagnosed with pneumonia many weeks after the chatter of her being ill began.  This is unlikely to be the October Surprise many expect, but it does introduce another twist into one of the strangest Presidential campaigns in modern electoral history. 

 

Interestingly, the 1980 election was the last time that a candidate who was trailing on October 1st, according to Gallup, went on to win the election.  In the eight elections since 1980, the candidate that has led on October 1st has gone on to win the Presidency.  So if history is any precursor, the next few weeks will be telling.

 

As the race stands today based on poll aggregates, Clinton is up by approximately 2.1 points.  This is within in the margin of error and according to Nate Silver at 538.com gives Clinton a 65.0% probability of winning.  If you are a Clinton supporter, this isn’t a terrible position except one small thing that we stock market operators deal with daily: momentum. 

 

There is no denying Trump has the momentum.  Whether it is Clinton’s sickness, a deflating of her post convention bounce, Trump just getting some verbal discipline, or recent miscues of Clinton’s, the poll numbers between the two candidates have narrowed meaningfully over the last month.  The Chart of the Day below highlights this graphically over the last 30 days.

 

In the same period, Trump’s favorability has increased while Clinton’s has decreased.  Both candidates remain two of the most unfavorable Presidential candidates ever with the delta between favorable and unfavorable at -13% and -19%, respectively.

 

Even though Clinton has led consistently and sometimes by a wide margin, we’ve long held that that this race will be close and Trump has a legitimate chance of winning. This view stands today.  Ironically, the reason that Trump may have a real chance at winning is the demographic makeup of his supporters.

 

Many have critiqued Trump’s inability to attract minority voters as likely death blow to his campaign.  A recent CNN poll emphasizes this with Trump ahead in the white vote 54 – 33 and Clinton leading the minority vote 70 – 13.  Far and away, Trumps polls the best with whites without a college degree and in that same CNN poll led that demographic by 66 – 23.

 

In a nation in which the growth minority segment of the population and electorate is outpacing the white portion, the pundits should be correct.  Except for one small fact ... the swing states are disproportionately white.

 

According to our partners at the non-partisan Cook report, they projected just over 70% of the electorate this election to be white.  There are roughly 15 so called “swing states” and of those 15 states, 10 of them have more white voters than the national average.  So, it’s not too difficult to see that if Clinton drives a lower minority turnout than President Obama (a reasonable assumption) and Trump can take a larger share of the White vote than Romney did, he may be better positioned than expected in the swing states.

 

The conclusion of all this? If you are expecting an October surprise, you shouldn’t (sorry Julian Assange!). The race is very close at the moment and if Trump can maintain his momentum the race will narrow even more.  Since Trump does have a legitimate shot at winning, it’s time to start thinking through scenarios with either Trump or Clinton as President.

 

Over the coming weeks, we have a number of events that will help you get up to speed on policy scenarios post the election.  If you’d like to attend any of these events or get the materials, please email .

  • Our healthcare policy analyst Emily Evans hosted a call yesterday discussing the health platforms of each candidate.  She is available for one-on-one briefings;
  • Today at 11am, our defense policy analyst former Lt. Gen Emerson "Emo" Gardner USMC Ret. (former CFO of the Pentagon) will be hosting the former Under Secretary of Defense for Dr. James Miller to discuss the key policy questions facing the next President;
  • On Tuesday September 20th, JT Taylor will host a granular election update via a conference call with Charlie Cook from the Cook Report;
  • On Wednesday September 21st, we will be hosting a group of investors in Washington in meetings with key decision makers  from “both sides of the aisle” to discuss the election and beyond (email your salesperson asap if interested);
  • Our entire policy research will be hosting a roundtable conference call to discuss the most up to date policies proposals of each candidate and an overview of the current Congress on Monday September 26th;
  • Finally, we will be hosting a small group dinner with Scott Reed, the chief political strategist of the U.S. Chamber of Commerce in New York on September 27th.

We hope you can join for some, if not all, of these events.  Preparation will be key for stock market operators heading into the election. As Benjamin Franklin famously said:

 

“By failing to prepare, you are preparing to fail.”

 

Indeed.

 

Our immediate-term Global Macro Risk Ranges and intermediate-term TREND Research Views (in brackets) are as follows:

 

UST 10yr Yield 1.47-1.73% (bearish)

SPX 2115-2167 (bearish)

Nikkei 160 (bearish)

VIX 14.03-19.22 (bullish)
USD 94.53-96.27 (bullish)
Oil (WTI) 42.77-47.54 (bearish)

Gold 1 (bullish)

 

Keep your head up and stick on the ice,

 

Daryl G. Jones

Director of Research

 

October Surprise - zb 09.14.16 EL Chart


Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.

September 14, 2016

Want more from Daily Trading Ranges? CLICK HERE to submit up to 4 tickers you'd like to see on the list. 

 

  • Bullish Trend
  • Bearish Trend
  • Neutral

INDEX BUY TRADE SELL TRADE PREV. CLOSE
UST10Y
10-Year U.S. Treasury Yield
1.73 1.47 1.73
SPX
S&P 500
2,115 2,167 2,127
RUT
Russell 2000
1,199 1,241 1,212
COMPQ
NASDAQ Composite
5,120 5,223 5,155
XOP
SPDR S&P Oil & Gas Explore
35.54 37.81 36.60
RMZ
MSCI US REIT
1,164 1,210 1,167
NIKK
Nikkei 225 Index
16,507 17,150 16,729
DAX
German DAX Composite
10,296 10,589 10,386
VIX
Volatility Index
14.03 19.22 17.85
USD
U.S. Dollar Index
94.53 96.27 95.56
EURUSD
Euro
1.11 1.13 1.12
USDJPY
Japanese Yen
101.19 104.37 102.56
WTIC
Light Crude Oil Spot Price
42.77 47.54 44.90
NATGAS
Natural Gas Spot Price
2.64 2.97 2.91
GOLD
Gold Spot Price
1,303 1,359 1,323
COPPER
Copper Spot Price
2.06 2.13 2.10
AAPL
Apple Inc.
102.99 109.65 107.95
AMZN
Amazon.com Inc.
749 791 761
JPM
J.P. Morgan Chase & Co.
65.33 67.79 66.53
INTC
Intel Corp.
35.14 36.97 35.61
LVS
Las Vegas Sands Corp.
52.70 58.50 56.54
CMG
Chipotle Mexican Grill
400 439 421

Hedgeye's Daily Trading Ranges are twenty immediate-term (TRADE) buy and sell levels, along with our intermediate-term (TREND) view.  Click HERE for a video from Hedgeye CEO Keith McCullough on how to use these risk ranges.


After 44 trading days of no US Equity Beta moves +/- 1%, we get 3 in a row!

Client Talking Points

UST 10YR

Wild and exciting move to the upside in yields provides for an epic buying opportunity in #GrowthSlowing assets – we know that’s not the way equity brokerages say it, but we don’t run a brokerage. Risk range on the 10yr widens out to 1.47-1.73%; in other words, yields can get slammed (again) if this the US “data” continues to slow Thursday/Friday.

Cyclicals

Oh, so it wasn’t a “bottom in global demand” (or PMIs and ISMs, or something like that), after-all? Fun narrative it was in Q2 though (when the “charts” looked good – now they don’t with Industrials, Transports, and Basic Mats –XLI, IYT, XLB - all breaking @Hedgeye intermediate-term TREND support within ongoing long-term TAIL risk views 

Gold

Steady is strong in the face of this melt-down in US Equity net LONG positioning (hit its max 2 weeks ago); Gold doesn’t seem to care about the personal issues people at the Fed seem to be having with forecasting; I’m starting like Gold more than long-term bonds right now – that means we like it a lot! Immediate-term risk range = 1303-1359/oz.

Asset Allocation

CASH US EQUITIES INTL EQUITIES COMMODITIES FIXED INCOME INTL CURRENCIES
9/13/16 55% 4% 4% 7% 27% 3%
9/14/16 54% 4% 4% 7% 29% 2%

Asset Allocation as a % of Max Preferred Exposure

CASH US EQUITIES INTL EQUITIES COMMODITIES FIXED INCOME INTL CURRENCIES
9/13/16 55% 12% 12% 21% 82% 9%
9/14/16 54% 12% 12% 21% 88% 6%
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

No update this week.

VYM

After a relative pull-back in large cap, low beta, liquid names (an exposure we’ve like for the balance of the year). We can now buy back that exposure lower. As you can see in the style factor table below, high debt, high beta, and small cap stocks in the S&P 500 have outperformed over the last month. As Keith McCullough wrote to II subs Friday:

 

“We've seen plenty a one-way chart chaser lose lots of other people's money doing it otherwise (they are chasing what’s worked recently). VYM has a 3% Yield and is signaling immediate-term TRADE oversold within our bullish intermediate-term @Hedgeye TREND view.”

TLT

No update this week.

Three for the Road

TWEET OF THE DAY

Steiner: Market Risks Significantly Exceed Reward app.hedgeye.com/insights/53788… via @Hedgeye

@KeithMcCullough

QUOTE OF THE DAY

“The best preparation for tomorrow is doing your best today.”

-H. Jackson Brown, Jr.

STAT OF THE DAY

Brian Dozier and Mark Trumbo lead the MLB in HR's with 41 each.


PREMIUM INSIGHT

About Everything: Aging Boomers (Big "Silver Tsunami" Implications)

About Everything:  Aging Boomers (Big "Silver Tsunami" Implications) - seniorwave1

In this complimentary edition of About Everything, Hedgeye Demography Sector Head Neil Howe discusses how America's aging Baby Boomers will feed (or starve) a wide range of industries—thanks to their sheer demographic size and generational preferences.


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