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The Most Obvious U.S. #GrowthSlowing Signal In All Of Macro

Takeaway: The steadily falling 10s/2s yield spread continues to indicate U.S. #GrowthSlowing.

There are innumerable examples of economic indicators rolling over that support our U.S. #GrowthSlowing call. So what's Fed head Janet Yellen talking about when she said the following last week:

 

“The Committee judges that the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives.”

"STRENGTHENED"?

 

The Fed's own 2016 GDP forecast was just revised down to +1.7%-1.9% from 1.9%-2.0% prior. Clearly, the Fed is trying to push a narrative about the U.S. economy that simply isn't true. 

 

So, after balking yet again on rate hikes, the 10s/2s Treasury yield spread compressed to 85 bps today. That's a crystal clear macro market signal confirming our call that U.S. growth continues to slow. 

 

The Most Obvious U.S. #GrowthSlowing Signal In All Of Macro - 10s2s 9 26

As you can see in the chart below...

 

The Treasury yield curve continues to flatten in spite of all the talk of Fed rate hikes and Wall Street's perennial fear that the bond market rally is finally dead. 

 

The Most Obvious U.S. #GrowthSlowing Signal In All Of Macro - yield curve 9 26

Make no mistake...

The U.S. economy continues to slow. The Fed can continue to pretend otherwise but reality always prevails.

 

The Most Obvious U.S. #GrowthSlowing Signal In All Of Macro - Yellen data dependent cartoon 11.18.2015


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Van Sciver: My Favorite Short Right Now Is…

Van Sciver: My Favorite Short Right Now Is… - HETV TMS DE 9.26.2016

In this brief excerpt from The Macro Show, Hedgeye Industrials analyst Jay Van Sciver responds to a subscriber’s question about his favorite short in the sector.


This Indicator Hits Level Not Seen Since Recession

The TED spread has our attention. With the market pricing in a drastic sudden increase in counterparty risk, the TED rose by 6 bps two weeks ago and by another 11 bps last week to 69, surpassing the 2011 spike and moving to levels we haven't seen since May 2009. 

 

This Indicator Hits Level Not Seen Since Recession - ted spread 9 26

 

Editor's Note: This is a brief excerpt from a research note written by Hedgeye Financials analyst Josh Steiner. To learn more about our institutional research ping sales@hedgeye.com.


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Why We're Sticking With Low-Beta

Takeaway: Low-beta continues to beat high-beta. We're sticking with the call.

Editor's Note: This is a complimentary excerpt from today's Early LookClick here to subscribe for $1 a day.

 

Why We're Sticking With Low-Beta - Growth cartoon 06.03.2015

 

WHILE IT MAY SEEM LIKE EVERYONE ON OLD WALL TV NAILS IT

 

...in Dow Bro terms every time the Fed is forced to pivot back to dovish on #GrowthSlowing data, your returns have been higher being longer of Long-term Bonds, Utilities, REITS, and Gold.

 

That’s right. Both the absolute and relative returns are higher, but so are the risk adjusted (volatility adjusted) payouts. Not to be mistaken for “bad (data) = good” weeks,  on days (like today) when bad = bad, Down Rates, Down SP500 happens.

 

Another way to express a lower-volatility, higher return portfolio in 2016 has been buying low beta, safe-yielding, stocks. If you look at the mean performance of the top quintile vs. bottom quintile of SP500 companies, here’s that story:

 

  1. Low-Beta Stocks were up +2.3% last week to +11.8% YTD
  2. High-Beta Stocks were up +0.8% last week to +6.2% YTD

 

Again. You get it. Everyone was a winner last week, but being long High-Beta lost to those of us who are long Low-Beta. This is called making a conscious portfolio bet that #GrowthSlowing will pay-out Low-Beta, as an investing Style Factor, over the sexier stuff.


All Good? Global Defaults Up +61%

Takeaway: Risk continues to rise around the world.

Looking at a global defaults tally from S&P, there were 5 new defaults last week. That brings the global tally to

 

(Drumroll please)

127 Year to date

 

That's up +61% Y/Y. The sustained weakness in the energy patch isn’t only hurting energy companies – Investors who sank money into a rebound are also under water.

 

A very active PE fund in Texas is now asking investors to fork over hundreds of millions of dollars to bolster the troubled funds ... or risk losing the billions they have already invested.

 

All Good? Global Defaults Up +61% - default

 

Editor's Note: The snippet above is from a note written by our Macro team and sent to subscribers this morning. Click here to learn more.


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