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CHART OF THE DAY: The Profit Cycle Peak Is In (An Economic Cycle Reality Check)

CHART OF THE DAY: The Profit Cycle Peak Is In (An Economic Cycle Reality Check) - 10.10.16 EL Chart

 

The Chart of the Day above shows the peak in S&P 500 corporate profits (hit in the second half of 2014). As you can see, once the peak is in, there's no coming back as the top always predates the next recession (red bar in the above).

 

As Hedgeye CEO Keith McCullough wrote in today's Early Look (our daily morning newsletter to subscribers) Wall Street remains way behind the curve in understanding our call on the peak in corporate profits. But reality continues to be priced into markets.

 

"Last I checked Wells Fargo (WFC) still has to report their new business reality on Friday... And I guess that brings me back to trying to find a bottom in the US corporate profit cycle. As you can see in today’s Chart of The Day, it’s coming off its all-time highs. And… for those who tried to “buy the bottom” during the last two economic cycle recessions (2000 and 2008), they better believe in the concept of cycles."

 

Getting ahead of major shifts in the economic cycle is how investors generate excess returns and avoid massive drawdowns. So just to recap, here's how the U.S. economic cycle has played out thus far…

 

  • 2H 2014: Income growth, corporate profits, and S&P 500 margins peak;
  • 1H 2015: Employment growth, consumption growth, consumer confidence, business confidence, net domestic investment and forward multiples peak;
  • 2Q/3Q 2015: Global equity markets peak;
  • 4Q 2015: M&A peaks and the bankruptcy cycle and credit market dislocations begin;


(Click here to watch a brief video of Hedgeye CEO Keith McCullough discussing U.S. economic growth in "An Animated History of U.S. #GrowthSlowing.")

Bottom Line:

Stay ahead of economic reality or get run over. No matter Wall Street's latest permabull narrative, the U.S. economy is past peak.


REPLAY! This Week On HedgeyeTV

Our deep bench of analysts take to HedgeyeTV every weekday to update subscribers on Hedgeye's high conviction stock ideas and evolving macro trends. Whether it's on The Macro ShowReal-Time Alerts Live or other exclusive live events, HedgeyeTV is always chock full of insight.

 

Below is a taste of the most recent week in HedgeyeTV. (Like what you see? Click here to subscribe for free to our YouTube channel.)

 

Enjoy!   

 

1. Peterson: How to Trade Fear, Groupthink & Your Own Biases (10/9/2016)

 

 

In this excerpt from a broader “Real Conversations” interview with Hedgeye CEO Keith McCullough, Dr. Richard Peterson explains how “fear” filters into his mathematical model (“fear for a biotech stock is good, but fear for American Airlines is bad”) and how the algorithm helped his firm successfully trade fade Brexit groupthink. McCullough and Peterson also discuss their constant struggle to override their own biases.

 

Want more? Click here to watch the entire interview with Peterson.

 

2. ‘Macro Mentoring’ Session 5: Macro Factors, Asset Allocation, The Cycle & More (10/8/2016)

 

 

In this week’s edition of ‘Macro Mentoring’, Hedgeye CEO Keith McCullough highlights the outlook for the U.S. Dollar , walks you through his asset allocation model as well the importance of knowing where we are within the cycle.

 

3. McCullough: Why Mainstream Media Is Wrong About Today’s Jobs Report (10/7/2016)

 

 

In this no-punches pulled excerpt from The Macro Show, Hedgeye CEO Keith McCullough explains what the media missed about today’s jobs report. 

 

4. Stockman: The Larry Summers ‘Jackass Scenario’ (10/7/2016)

 

 

In this excerpt from a “Real Conversations” interview with David Stockman, the former Reagan budget director discusses what the Federal Reserve would look like with Larry Summers at the helm. He explains to Hedgeye CEO Keith McCullough why “Summers is one of the greatest jackasses in the Western world” and how his appointment would lead to a long overdue examination of Fed politicization. 

 

5. McCullough: An Update On Our Q3 Macro Themes (10/6/2016)

 

 

In this excerpt from The Macro Show this morning, Hedgeye CEO Keith McCullough reviews how our analysts’ Q3 macro themes fared, and offers a glimpse of what lies ahead in the current quarter.

  

6. The Fiscal ‘Boa Constrictor’ On U.S. Families (10/6/2016)

 

 

In this excerpt from a “Real Conversations” interview, industry veteran and portfolio manager Michael Aronstein, CIO of Marketfield Asset Management, sat down with private investor Buddy Carter and Hedgeye CEO Keith McCullough to discuss the growing fiscal drag on U.S. families.

 

7. David Stockman Unplugged: ‘Casino Capitalism Fueling Mutant Markets’ (10/5/2016)

 

 

Outspoken former Reagan budget director and bestselling author David Stockman chats with Hedgeye CEO Keith McCullough in this no-holds-barred discussion about his new book, “Trumped.” Stockman pulls no punches on what believes is an out-of-control Federal Reserve, mutant markets and a vulnerable economy. According to Stockman, “The Fed has fallen so far down the Keynesian rabbit hole, it can’t see daylight.”

 

8. McCullough: ‘One of the Best Books I’ve Read’ (10/4/16) 

 

 

Hedgeye CEO Keith McCullough discusses why Wharton School of Business management professor Adam Grant’s new book “Originals: How Non-Conformists Move the World” is a must read during this excerpt from The Macro Show.

 

9. Steiner: Deutsche Bank’s $50 Trillion Problem (10/3/2016)

 

 

In this brief excerpt from The Macro Show earlier today, Hedgeye Financials analyst Josh Steiner explains why Deutsche Bank is a massive financial market risk that’s underappreciated by investors.

 

10. McCullough: Shame On You, Ben Bernanke (10/3/2016)

 

 

In this brief excerpt from The Macro Show earlier today, Hedgeye CEO Keith McCullough explains why “it’s not different this time” and former Fed head Ben Bernanke is to blame.

 

Click here to subscribe for free to our YouTube channel.


Peterson: How to Trade Fear, Groupthink & Your Own Biases

In this excerpt from a broader “Real Conversations” interview with Hedgeye CEO Keith McCullough, Dr. Richard Peterson explains how “fear” filters into his mathematical model (“fear for a biotech stock is good, but fear for American Airlines is bad”) and how the algorithm helped his firm successfully trade fade Brexit groupthink. McCullough and Peterson also discuss their constant struggle to override their own biases.

 

Dr. Richard Peterson, a board-certified psychiatrist and CEO of MarketPsych, is among the foremost leaders in the area of applied behavioral finance. His team has developed an algorithm that crunches data from more than 2,000 media outlets and 800 social media sites to interpret investor sentiment and suggest trading opportunities. Based on that data, they put together a market-neutral social media-based hedge fund that beat the S&P 500 by more than twenty-four percent—through the 2008 financial crisis.

 

Want more?

 

Watch this edition of “Real Conversations” in its entirety below.

 


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This Week In Hedgeye Cartoons

Our cartoonist Bob Rich captures the tenor on Wall Street every weekday in Hedgeye's widely-acclaimed Cartoon of the Day. Below are his five latest cartoons. We hope you enjoy his humor and wit as filtered through Hedgeye's market insights. (Click here to receive our daily cartoon for free.)

 

Enjoy!

 

1. Dominoes (10/7/2016)

This Week In Hedgeye Cartoons - GDP cartoon10.07.2016

 

Here's how the dominoes fall. Jobs growth slows => Number of Hours Worked falls => Productivity slips => GPD dips.

 

2. Trump vs. Clinton (10/6/2016)

This Week In Hedgeye Cartoons - Clinton Trump cartoon 10.06.2016

 

Political uncertainty is at historic highs across the buyside and in corporate boardrooms. Trump or Clinton... you nauseous yet?

 

3. Clown Show (10/5/2016)

This Week In Hedgeye Cartoons - Fed clown cartoon 10.05.2016

 

Fed credibility is slipping and it's not funny. It's getting downright scary.

 

4. Boob Tube (10/4/2016)

This Week In Hedgeye Cartoons - Central bankers cartoon 10.04.2016

 

We believe central bankers around the globe remain one of the biggest market and economic risks. We encourage you to take a closer look at our thoughtful suite of products which can help you navigate these treacherous macro waters. 

 

Click here to receive our daily cartoon for free.

 


The Week Ahead

The Economic Data calendar for the week of the 10th of October through the 14th of October is full of critical releases and events. Here is a snapshot of some of the headline numbers that we will be focused on.

 

CLICK IMAGE TO ENLARGE.

The Week Ahead - 10.07.16 Week Ahead


‘Macro Mentoring’ Session 5: Macro Factors, Asset Allocation, The Cycle & More

In this week’s edition of ‘Macro Mentoring’, Hedgeye CEO Keith McCullough highlights the outlook for the U.S. Dollar , walks you through his asset allocation model as well the importance of knowing where we are within the cycle.


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This indispensable trading tool is based on a risk management signaling process Hedgeye CEO Keith McCullough developed during his years as a hedge fund manager and continues to refine. Nearly every trading day, you’ll receive Keith’s latest signals - buy, sell, short or cover.

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