CLIENT TALKING POINTS

Manufacturing

The Philly Fed survey for February jumped to its highest level in 33 years, following the balance of early regional Fed Survey releases higher.   Notably, capex plans have shown a meaningful positive inflection over the last three months suggesting the improvement in core capital investment orders (which had been negative for 13-consecutive months and for 22 of the previous 23 months until December) is likely to persist and inventory investment may continue as a positive contributor to GDP. 

High-Yield and Junk

If you want a look at the growth accelerating trade just take a look at high yield and junk corporate spreads and volatility. 30D realized volatility in HYG and JNK just hit fresh is at all-time lows as of the close yesterday. Looking at high yield spreads, the Barclays high yield OAS index is making new lows and now just +44bps off cycle lows in June 2014. Spreads tightening in a strong currency, rising rate environment, adds some kick to the growth cocktail. 

British Pound

We like the Pound Sterling (this week we recommended buying the GBP/USD via the etf FXB) as we see a case for UK growth and inflation accelerating continuing to play out. That said we won’t be playing the cross too cute as continued Brexit Risks and Trump’s strong dollar will pressure GBP/USD to the downside (GBP/USD is -13.1% Y/Y and +70bps YTD). Former PM Tony Blair was on the soapbox this morning calling to ignite another vote on Brexit, while mere sound bites (Blair is wildly unpopular in Britain), today’s UK retail sales number for January of 1.5% Y/Y (vs expectations of 3.4% and December’s 4.1%) is helping to pull the island currency lower. 

Asset Allocation

CASH US EQUITIES INTL EQUITIES COMMODITIES FIXED INCOME INTL CURRENCIES
2/16/17 47% 13% 12% 11% 0% 17%
2/17/17 42% 15% 13% 11% 0% 19%

Asset Allocation as a % of Max Preferred Exposure

CASH US EQUITIES INTL EQUITIES COMMODITIES FIXED INCOME INTL CURRENCIES
2/16/17 47% 39% 36% 33% 0% 52%
2/17/17 42% 45% 39% 33% 0% 58%
The maximum preferred exposure for cash is 100%. The maximum preferred exposure for each of the other assets classes is 33%.

THREE FOR THE ROAD

TWEET OF THE DAY

Despite remaining near the AT lows in realzd vol, premiums have moved slightly higher,but in NDX and SPX, both realzd and impld near AT Lows.

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QUOTE OF THE DAY

“The majority of men meet with failure because of their lack of persistence in creating new plans to take the place of those which fail.“

-Napoleon Hill

STAT OF THE DAY

Sidney Crosby is the 11th youngest player in the NHL to reach 1,000 points.