In this week’s edition of ‘Macro Mentoring’, Hedgeye CEO Keith McCullough shows viewers how he uses the sine curve when analyzing the Non-Farm Payrolls and why he is predicting a slowdown in the broader economy. He also explains what’s driving U.S. bond yields.
In this excerpt from The Macro Show earlier today, Hedgeye Demography Sector Head Neil Howe discusses his post-election outlook. It’s pretty grim.
- Hillary Clinton will win the White House
- The Senate will tip in favor of Republicans
- Republicans will hold the House
This will incite gridlock and Clinton won’t be able to get anything done, he says. “The loser of the [White House], in 2016, will feel like an enemy occupied country and will behave accordingly,” Howe says. This will have implications for the Supreme Court, tax reform, and proposed infrastructure spending.
Other questions remain. What happens if U.S. economic growth slips? Or maybe there’s a foreign crisis? “It’s going to get really nasty and I expect the markets to reflect that,” Howe says.
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Jason Furman, chair of the White House Council of Economic Advisers, actually said last week, "I don't think you're late cycle... I just don't believe in the concept of late cycle." We crowned that statement "the most glaringly irresponsible statement" of the day.
Takeaway: The reality is that things aren't as good, underneath the hood.
According to the Wall Street Journal:
This story misses the mark on a number of levels. That supposed "rebound" in retail sales was on the headline number, +0.6% month-over-month. Auto sales were a major contributor to the uptick, +5% on a month-over-month basis.
This only scratches the surface. What investors need to watch is the so-called "Control Group" within retail sales. This is the *all-important data set* that is a proxy for what's input into GDP. On that score, the data was decidedly bad.
- The Retail Sales "control group" came in at +3% y-o-y, down from the peak of nearly 5% in 2015.
- Meanwhile, the annualized quarterly average was remarkably slow, at +0.3%, down from 6.8% in the second quarter.
This amounts to a sizeable decline in a large GDP contributing data point. In other words...
There's no "rebound" to be found.
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