“My family is American.”
-Ulysses S. Grant
I’m fifteen chapters into American Ulysses, by Ronald C. White. If you’re into having an ongoing education about US History (published in 2016), I highly recommend this book. It’s decorated with leadership lessons in American life.
As White reminds us, “although he was celebrated in his lifetime as a prime example of the mythic American self-made man, Ulysses S. Grant understood the formation of his life to be a family affair.”
Oh do I appreciate that. While I lived my formative family years in a small town in Canada, my wife and I are raising a family of four children in America. My firm is American. And I couldn’t be more proud to say that I’ve built that alongside American teammates.
Back to the Global Macro Grind…
I realize some people have polarizing political anxieties, biases, and beliefs these days. I don’t have to agree with all of them to respect them. But the small business operator in me would appreciate the same respect right back.
If the US economy’s growth trajectory continues to accelerate, that is good for both my family and firm. I don’t care if a raccoon is President of the United States. I don’t wake up every morning worrying about him and/or other people’s politics.
I care about the data. And on both the GROWTH and INFLATION fronts, big US economic data accelerated, again, yesterday:
- US Retail Sales – the “control group” (that matters when calculating US GDP) accelerated to +4.0% year-over-year growth for the month of JAN vs. +3.4% y/y growth in DEC
- US Consumer Price Inflation (CPI) – accelerated to +2.5% year-over-year in JAN vs. +2.1% y/y in DEC
For both headline and core inflation, that’s the highest “level” in 5 years. Predicting higher and higher levels is achieved by measuring and mapping rates of change against the prior year’s “base effects” (comparative reporting period).
The only data that was less obviously bullish (from a US Dollar, Stock Market and Bond Yield perspective) was Industrial Production growth slowing back down to 0.0% year-over-year in JAN vs. +0.7% y/y in DEC.
But, after plugging all of the data into our predictive tracking algorithm for US GDP…
A) We’re upping our Q1 US GDP forecast to +2.29% year-over-year, and
B) That currently implies a +2.35% q/q SAAR GDP forecast for Q1 (which is how Wall St. reads the headline)
You may not want to get too carried away here as this revision to our US GDP forecast comes on the heels of 18 data points out of the 30 per month that register as statistically significant in our model…
But get right fired up about it, if you will! #USA, #USA
If this GDP level holds up, perpetuating Quad2 (growth and inflation accelerating) throughout the quarter, literally the only fundamentally bearish sign post I’ve been marking for investors (in the next 1.5 months) gets burned down at a raging bull bonfire.
Being good Bayesian Boys, my newly minted Managing Director @Hedgeye, Darius Dale, and I have no problem looking one another in the eye after data like this is released and say “wow, brother – that’s good!”
The question is… will the portfolio managers and pundits who absolutely hate the political victor cede their positions to the data? I don’t know, but after being wrong for 2-days on my ‘getting too cute’ “overdone” idea, I just did!
Our immediate-term Global Macro Risk Ranges (TREND views in brackets) are now:
UST 10yr Yield 2.35-2.55% (bullish)
SPX 2 (bullish)
RUT 1 (bullish)
NASDAQ 5 (bullish)
Nikkei 19105-19598 (bullish)
DAX 118 (bullish)
VIX 10.35-12.40 (bearish)
USD 99.60-101.75 (bullish)
EUR/USD 1.05-1.07 (bearish)
YEN 112.06-114.98 (bearish)
Oil (WTI) 51.95-54.20 (bullish)
Nat Gas 2.83-3.20 (bearish)
Gold 1 (neutral)
Copper 2.59-2.81 (bullish)
AAPL 132.00-136.63 (bullish)
AMZN 816-849 (bullish)
FB 131-136 (bullish)
GOOGL 818-845 (bullish)
MU 22.61-25.00 (bullish)
BAC 23.05-24.69 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
