CLIENT TALKING POINTS
UST 10YR
Was that the last big fat pitch of a buying opportunity for those who have missed #GrowthSlowing and Lower-For-Longer on rates? We think so. UST 10YR slammed back down to 1.56%; 10s/2s spread right back to the YTD lows at 81bps and Financials (XLF) -4.4% in SEP vs. our beloved Utes (XLU) +3.2% SEP to-date.
Oil
#NoFreeze, and WTI pulls back hard from @Hedgeye’s top-end of the risk range (currently = $42.60-46.51); our Energy Policy analyst, Joe McMonigle, remains steadfast on the “no freeze anytime soon” call and we still love the Long Gold vs. Short Oil pair.
VIX
Who do you love? Do you let your politics influence how you risk manage your portfolio? We predict volatility wins into election day; immediate-term risk range for front-month VIX = 12.01-18.78; staying with Long-term Bonds, Utes, Gold, and Low-Beta as a style factor.
TOP LONG IDEAS
GLD
We named the current monetary policy committee a group of “dovish hawks” in a research note after Wednesday’s FOMC statement where the Fed tried to convince the market that the case for a December rate hike had strengthened.
“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.”
However, a look under the hood at the committee’s “summary economic projections” provides incremental dovish color (all of which are good for slow-growth allocations and why our macro long positions in Investing Ideas had positive performance w/w).
- The Fed’s dot plot was taken down at all durations into the future
- 2016: revised to +0.625% from 0.875%
- 2017: 1.125% from 1.625%
- 2018: 1.875% from 2.875%
- The median forecast for the Fed Funds Rate in the “long run” was revised down to 2.875% from 3% prior
- 2016 GDP forecast: revised to +1.7%-1.9% from 1.9%-2.0% prior
- 2016 PCE Price Index: revised to +1.2-1.4% from +1.3-1.7% prior
So growth continues to slow, and from our analysis, a significant amount of risk is on the table for investors who have chased reflationary asset prices in 2016.
VYM
See update above.
TLT
See update above.
Asset Allocation
| CASH | US EQUITIES | INTL EQUITIES | COMMODITIES | FIXED INCOME | INTL CURRENCIES | |
|---|---|---|---|---|---|---|
| 9/26/16 | 65% | 2% | 3% | 6% | 22% | 2% |
| 9/27/16 | 66% | 2% | 3% | 7% | 19% | 3% |
Asset Allocation as a % of Max Preferred Exposure
| CASH | US EQUITIES | INTL EQUITIES | COMMODITIES | FIXED INCOME | INTL CURRENCIES | |
|---|---|---|---|---|---|---|
| 9/26/16 | 65% | 6% | 9% | 18% | 67% | 6% |
| 9/27/16 | 66% | 6% | 9% | 21% | 58% | 9% |
THREE FOR THE ROAD
TWEET OF THE DAY
Like @JoeMcMonigle has been saying for some time now... Algiers Freeze On The Rocks. app.hedgeye.com/feed_items/540… @KeithMcCullough pic.twitter.com/zuDOB2fcdx
@Hedgeye
QUOTE OF THE DAY
“Great leaders are almost always great simplifiers, who can cut through argument, debate and doubt, to offer a solution everybody can understand.”
–Colin Powell
STAT OF THE DAY
Drew Brees threw for 376 yards, 3 TD's and 1 INT in a loss to the Atlanta Falcons.
