CLIENT TALKING POINTS
UST 10YR
All the way back down to 1.61% this AM (10s/2s back down to 84bps) – that’s 6x in 16 months that you had an outstanding buying opportunity in long-term bonds and/or stocks that look like bonds; now we go back to no Fed to stress over as both the slowing economic data and Q3 earnings season take over.
Reflation
CRB Index, Oil, Gold, etc. all signaled immediate-term TRADE overbought on the Fed Fade yesterday; so did multiple cyclical sectors, including Industrials (XLI) which was my 1st S&P Sector pick on the short side as I started selling mostly everything I bought into the Fed catalyst.
VIX
Front month US Equity Volatility signaled immediate-term TRADE oversold within its bullish TREND yesterday too; risk range on that is very wide now at 11.73-19.29, so now that I have the cute trade around the Fed out of the way, it’s back to risk managing what I think could be some serious US equity chop in OCT-NOV.
TOP LONG IDEAS
GLD
On the inflation front, comps get much easier moving forward (we’ve been in a deflationary environment for 2 years!). Our GDP estimates for Q3 and Q4 are below the street and Central Bank forecasts. For the full-year, we’re well below at +1.2% Y/Y vs. the Fed at 2.0%. If these estimates converge, we expect it to be dovish on the margin when coupled with our bearish rates view. The inflation comps effect and a policy catalyst are shaping our fundamental views of a longer term gold position (GLD).
VYM
We continue to observe that growth is slowing in aggregate. We continue to like bonds (TLT, MUB) and bond proxies (VYM).
TLT
See update on VYM.
Asset Allocation
| CASH | US EQUITIES | INTL EQUITIES | COMMODITIES | FIXED INCOME | INTL CURRENCIES | |
|---|---|---|---|---|---|---|
| 9/22/16 | 47% | 4% | 5% | 12% | 29% | 3% |
| 9/23/16 | 62% | 2% | 3% | 6% | 25% | 2% |
Asset Allocation as a % of Max Preferred Exposure
| CASH | US EQUITIES | INTL EQUITIES | COMMODITIES | FIXED INCOME | INTL CURRENCIES | |
|---|---|---|---|---|---|---|
| 9/22/16 | 47% | 12% | 15% | 36% | 88% | 9% |
| 9/23/16 | 62% | 6% | 9% | 18% | 76% | 6% |
THREE FOR THE ROAD
TWEET OF THE DAY
VIDEO: Real Conversations: Michael Aronstein ‘Unplugged’ on the Biggest Market Risks app.hedgeye.com/insights/54013… via @Hedgeye
@KeithMcCullough
QUOTE OF THE DAY
“Patience, persistence and perspiration make an unbeatable combination for success.”
-Napoleon Hill
STAT OF THE DAY
Jeurys Familia leads the MLB in saves with 49.
