“Mightiest among the mighty dead loom the three great figures of Washington, Lincoln, and Grant.”
-Teddy Roosevelt
When it comes to long-time dead US Presidents, I’d have a hard time disagreeing with my favorite US President (Teddy Roosevelt) on that. The aforementioned quote comes from a big US history book I cracked open this weekend, American Ulysses.
While many in establishment political punditry seem to think they know everything about what the Trump Presidency will bring, they allegedly knew he didn’t have a hope in hell in getting elected too. There’s clearly some comedy in that.
‘The ladies doth protest too much’? I have no idea. I spend my weekends doing other things, like enjoying time with my family. There have been plenty of bearish protesters to ignore on US growth accelerating and the US stock market’s all-time highs too.
Back to the Global Macro Grind…
What will the US growth and inflation #accelerating protesters do if we’re right and US GDP accelerates to +2.91% (q/q SAAR) on Friday? What will they do if Durable Goods print their 2nd straight non-recessionary report too?
US stocks (SP500) were flattish to down last week and that’s partly because the US Dollar was down small (-0.3% week-over-week). Intermediate to long-term correlations between USD and US stocks remain positive inasmuch as USD vs. Gold remain negative:
- USD vs. SP500 on a 90-day and 120-day duration = +0.81 and +0.72, respectively
- USD vs. Gold on a 90-day and 120-day duration = -0.95 and -0.97, respectively
Does that make sense, fundamentally? Sure. In Quad2 (when both growth and inflation are accelerating), there’s a central tendency for the US Dollar and Interest Rates to rise, at the same time, as Higher Beta Stocks do.
Gold does not like Dollar Up, Rates Up whatsoever. It loves #GrowthSlowing (Dollar Down, Rates Down).
While the SP500 move was meh (-0.1% on the week), this is what else happened:
- US Treasury 10yr Yield was +7 basis points on the week to 2.47%
- Commodities (CRB Index) were meh too, -0.3% on the week to 194
- Oil was meh, +0.1% to $53.18 WTI week-over-week
Macro usually isn’t meh like that, so there’s not much to call out this morning. People who were looking for Trump’s coronation to move markets big, either way, got meh instead of something you-ge!
There was a little more pin-action on the Brexit side of political anxieties than there was in the USA:
- The British Pound (which we’ve liked) ramped +1.5% on the week, backing up to $1.24 vs. USD
- Stocks in London (the FTSE) didn’t like that, dropping -1.9% on the week back to +0.8% YTD
From a positioning perspective (non-commercial CFTC futures & options positioning):
- SP500 (Index + E-mini) net LONG position remain relatively small, +14k contracts on the week to +28,082
- USD net LONG positon came down -4k contracts week-over-week to +49,042
- Yen net SHORT position got -1.5k shorter week-over-week to -82,899
- Gold’s net LONG position went up +5.5k contacts week-over-week to +59,936
- Oil’s net LONG position ramped another +25k contracts last week to +508,702
- 10YR Treasury net SHORT position dropped -40k contracts last week to -346,184
In other words, in terms of futures & options positioning, Long-term Treasuries and Japanese Yen are the two most consensus bear positions (looking at 1-year z-scores) and long Oil is the most consensus net long position.
“Long US Stocks” (SP500) is neither consensus from a positioning (+0.23x on a 1-yr z-score) nor a fund flows perspective.
That’s what makes these mighty bearish protests so interesting to me. Instead of getting the politics right, I think that if you get the rate of change in the growth and inflation data right, you’ll be less stressed and enjoying time with your families too.
Our immediate-term Global Macro Risk Ranges and intermediate-term TREND Research Views (in brackets) are now:
UST 10yr Yield 2.31-2.51% (bullish)
SPX 2 (bullish)
RUT 1 (bullish)
NASDAQ 5 (bullish)
XOP 40.07-42.00 (bullish)
RMZ 1140-1170 (neutral)
Nikkei 188 (bullish)
DAX 111 (bullish)
VIX 10.64-13.09 (bearish)
USD 99.75-102.90 (bullish)
EUR/USD 1.04-1.07 (bearish)
YEN 112.40-116.31 (bearish)
Oil (WTI) 50.58-54.13 (bullish)
Nat Gas 3.04-3.51 (bullish)
Gold 1170-1219 (bearish)
Copper 2.50-2.70 (bullish)
Best of luck out there this week,
KM
Keith R. McCullough
Chief Executive Officer
