It's pretty simple.
As you can see in our Chart of The Day, here’s our stylized model for how every economic cycle plays out with commentary from Hedgeye CEO Keith McCullough in this morning's Early Look:
- "Cyclicals peak 1st (that’s why we call them cyclicals)"
- "Late Cycle (employment and consumption) peak and roll last"
That's the point. Alcoa (AA) is a cyclical. The industrial conglomerate kicked off earnings season yesterday. The stock was down over -10%, missing even Wall Street's bombed out earnings and revenue numbers. Honeywell (HON), PPG Industries (PPG), and Dover Corp (DOV) are industrials too. Those companies all pre-announced ugly revisions to previous earnings and revenue estimates. The stocks got hammered.
In case you missed it, then came Fastenal (FAST) earnings yesterday. Here’s what Fastenal’s CFO, Holden Lewis, had to say on the FAST call:
"Qualitatively, it's not clear to us that the tone changed much in the third quarter. We saw that the sales of fasteners and heavy manufacturing construction end markets were relatively weak as we have seen before. The same could be said of our largest customers, our top 100 was flat to maybe down slightly during the period. But again, these are the same dynamics that have persisted throughout 2016."
Then, during the Q&A, Fastenal CEO, Daniel Florness was asked whether or not he was “seeing any signs that the industrial economy was bottoming." Florness replied:
“I can’t say that we are… I can’t say that we’re seeing any kind of inflection.”
So there you have it. Industrials are rolling over again (a.k.a. #DoubleDipRecession called out by our Macro team last week) and jobs market growth, the latest of #LateCycle lagging indicators, continues to decline. There's really only one takeaway from all of this...