If you get the U.S. economic cycle right, you're going to get the big market moves in macro right. And that's where the big money is made.
Right now, as many investors debate whether the Industrial side of the U.S. economy has bottomed, Hedgeye CEO Keith McCullough is stressing caution. Yes, our forecast suggests that U.S. economic growth and inflation heading into the fourth quarter are both accelerating. That said, just because this particular (cyclical) side of the economy may be bottoming doesn’t mean investors should go hog wild and get long all stocks.
Be more selective. Mind the economic cycle.
In the video excerpt above, McCullough responds to a subscriber’s question during The Macro Show about whether to buy Consumer Discretionary (XLY) stocks.
“Don’t forget that it’s not early and late cycle all at once in everything. We could be in an early cycle recovery in cyclicals, but we’re still late cycle on employment, consumption and income.”
None of this bodes well for Consumer Discretionary stocks. There’s more bad news for any stock tethered to U.S. consumers. Fourth quarter consumer spending will have to exceed a 2-year comparison that is at a 9-year high to show any growth, McCullough says.
In other words, pick your spots. Know the cycle.
