“Never believe that a few caring people can’t change the world. For, indeed, that’s all who ever have.”
-Margaret Mead
I have been humbled by the work our Hedgeye Cares team has done in the past 3 years for young students in our area and have been inspired by the notion that a little actually can go a long way.
I would like to invite you to be part of the positivity that we are bringing to a group of children in Bridgeport, CT by getting involved in our 4th Annual Hedgeye Cares Charity Golf Challenge on Tuesday, May 16th at GlenArbor Golf Club.
Proceeds from the golf outing will go toward the Bridgeport Caribe Youth Leaders’ programs, which focus on providing youth with diverse educational and sports opportunities that foster intellectual, physical and social development.
The Lincoln Motor Company has generously been our Platinum Sponsor for our past 3 tournaments and I want to take this opportunity to thank them and also open this exclusive title sponsorship opportunity up to our Hedgeye Community. Not only is this a wonderful way to give back but it also serves as a unique marketing event.
Having a strong support system has helped us all become as successful as we are today, and we at Hedgeye relish the opportunity to help put local children in a position to succeed. Please email Josefine at for specific sponsorship details.
Back to the Global Macro Grind…
All a “broad based correction” (see Old Wall Media for biased “news” coverage) in the US stock market could muster was a -0.3% down day yesterday. That was only the 5th down day in the last 19 trading days for the SP500. It was the 2nd largest “correction.”
The only sector that was up on the day was the YTD’s worst performer. Energy (XLE) was +0.2% to -4.2% YTD. The Financials (XLF), which were up another +2.3% last week, corrected -0.8% to +6.6% YTD.
Since my intermediate-term TREND duration is, by definition, “3 months or more”, the whole “YTD” thing doesn’t really mean anything until the end of March. The TREND I’ve been trying to focus you on is what’s been happening for the last 4-6 months.
From a Style Factor perspective, here’s how the US Equity market scores in the last 6 months:
- BETA: High Beta = +16.8% vs. Low Beta +2.4%
- SIZE: Big Cap = +12.1% vs. Smaller Cap +1.0%
- GROWTH: Top 25% EPS Growers = +10.4% vs. Bottom 25% EPS Growers = +2.8%
In other words, if you’ve been long Big Cap Growth with a High Beta tilt, you have flat out crushed it on both an absolute and relative return basis. Being long Low Beta, Slow Growth is not the portfolio to have during US #GrowthAccelerating.
But that’s yesterday’s news. You could have bought loads full of FANG and/or Nasdaq exposure back in late-December, don’t forget. That’s when the “technicians” sold everything to you using their 50-day moving monkey charts.
So what would the short-term-simple-moving-average-chart-chasing crowd tell you about buying the Russell 2000 (IWM) vs. the Nasdaq today? #NoWayBro. Those charts are breaking down, bro.
Are they?
How is a chart whose price just registered an all-time closing high (the Russell 2000 closed at an all-time high of 1413 last week) “breaking down”? Obviously there’s a difference between “breaking down” and under-performing.
If we’re right on US GDP #GrowthAccelerating to higher year-over-year highs for the next 9 months, I highly doubt that the Russell 2000 and/or its smaller cap, higher-beta, growth components are going to be a bad place to be.
As opposed to buying more “value” exposure (like Energy), I’ve been thinking about buying Russell Growth exposure. You can isolate being long “growth” vs. “value”, in smaller cap Style Factor terms using the following ETFs:
- Russell 2000 Growth ETF = IWO
- Russell 2000 Value ETF = IWN
I realize that it’s harder to buy Russell Growth (IWO), Nasdaq (QQQ), SP500 (SPY), Financials (XLF), etc. today than it was during the late-November and late-December corrections. But no one can change that. Especially on pullbacks, life is hard.
On that score (and again thank you for considering it), there are a lot more people in this world who have harder decisions to make in terms of putting food on their table and shelter over their children’s heads. So, together, let’s help them change their world.
Our immediate-term Global Macro Risk Ranges (intermediate-term TREND views in brackets) are now:
UST 10yr Yield 2.42-2.55% (bullish)
SPX 2 (bullish)
RUT 1 (bullish)
NASDAQ 5 (bullish)
XOP 37.27-39.99 (bearish)
RMZ 1152-1192 (neutral)
Nikkei 193 (bullish)
DAX 111 (bullish)
VIX 10.57-12.31 (bearish)
USD 101.05-102.25 (bullish)
EUR/USD 1.04-1.06 (bearish)
YEN 112.60-114.99 (bearish)
Oil (WTI) 52.53-54.62 (bullish)
Nat Gas 2.65-2.95 (bearish)
Gold 1 (bearish)
Copper 2.62-2.75 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
