CLIENT TALKING POINTS
Oil
If you didn’t know this was coming, now you know – but with this OPEC ramp out of the way does it change A) WTI being bearish on @Hedgeye’s TREND and TAIL risk durations? And/or B) Oil’s Volatility (OVX) still in a raging bullish formation at 45? Nope. Staying with the Oil risk range of $42.88-47.39; trade it
VIX
Oil volatility (OVX) up, US Equity Volatility (VIX) down to 12.39 as the flow-through to US Equities gave Energy stocks (XLE) 1/3 of its YTD return, in a day! (love month-end) – all VIX drops to 10-11 have been fantastic selling opportunities – let’s see if we get that on another #GrowthSlowing GDP report.
Sectors
Definitely not chasing Energy here – SEP US Equity Sector Returns look a lot like the YTD ones – staying with the long Utes (XLU) vs. short Financials (XLF) strategy that we’ve had since JAN, with Utes +1.7% for SEP vs Fins -3.2%.
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 | |
|---|---|---|---|---|---|---|
| 9/28/16 | 65% | 2% | 3% | 8% | 18% | 4% |
| 9/29/16 | 65% | 2% | 3% | 8% | 18% | 4% |
Asset Allocation as a % of Max Preferred Exposure
| CASH | US EQUITIES | INTL EQUITIES | COMMODITIES | FIXED INCOME | INTL CURRENCIES | |
|---|---|---|---|---|---|---|
| 9/28/16 | 65% | 6% | 9% | 24% | 55% | 12% |
| 9/29/16 | 65% | 6% | 9% | 24% | 55% | 12% |
THREE FOR THE ROAD
TWEET OF THE DAY
"Almost every major market move needs a centrally planned catalyst at this point. It's sad." -@KeithMcCullough #OPEC #Oil #Fed $SPY pic.twitter.com/1SRT0czWT9
@Hedgeye
QUOTE OF THE DAY
“Life is nothing but a memory. People who dwell on the bad ones aren't going to have a whole lot of good ones coming up.”
–John Daly
STAT OF THE DAY
The New England Patriots are 3-0 heading into week 4.
