[UNLOCKED] Early Look: Really Hard Data

Editor's Note: Below is our daily market newsletter the Early Look from Friday, March 31st written by Hedgeye CEO Keith McCullough. In it, McCullough discusses Thursday's all-time closing high in the Nasdaq, where we think the U.S. economy is headed and why investors should be raising cash to buy U.S. stocks on market pullbacks. 

Click here to learn more about the Early Look.

“Life is hard. After all, it kills you.”

-Katherine Hepburn

I think Hepburn was talking about being bearish when US growth is accelerating. That just kills returns. This entire “soft” versus “hard” data meme that everyone from the New York Times to the Old WSJ is just killing mainstream media investors too.

BREAKING NEWS: WSJ’s Ahead of The Tape Column Is Cautious On The Economy

And guys are charging 2 and 20 for that view? How about 2 bucks? In other news, the Nasdaq ramped right back up to an all-time closing high of 5,914 yesterday to +9.9% YTD after both US GDP and Corporate Profit growth #accelerated, again.

Back to the Global Macro Grind…

No, I’m not going to tell you to buy stocks at the all-time highs. That’s not how I roll. I did my best to tell you to buyem’ on pullbacks to the low-end of my immediate-term ranges in the past few weeks. Now we can book some gains.

Back to the hard vs. soft thing - the “soft” data crowd definitely shouldn’t talk about hard data like GDP and Corporate Profits #accelerating. Since most of them wake up in the morning looking for reasons to hate on Trump, here’s what they missed:

1. Consumption: Q416 GDP revised +10 basis points to +2.0% year-over-year with the positive +50 basis point revision to Consumption growth leading the upside
2. Corporate Profits: ramped to +9.3% year-over-year (great chart – see Chart of The Day). Recall this TREND of profits #accelerating comes after 5 consecutive quarters of negative y/y profit growth

In other words, “the divergence between” (WSJ, NYT, etc.) what the mainstream is saying about the hard data and what it’s actually doing is hitting record rhetorical highs!

Btw, what did all of these people say from the mid-cycle GDP high of Q1 2015 to the #GrowthSlowing low of Q2 2016 when both the “soft” and “hard” data were getting smoked?

By the time US Corporate Profits plunged to their recessionary lows of -11.2% year-over-year (see chart) in December 2015, the US stock market was in freefall and bond yields were well on their way to registering record lows.

Oh, they didn’t write about it that way, did they? How about these facts?

1. Russell 2000 crashed -28% from its July 2015 high to Q1 2016 low
2. The average decline of a stock in the Russell over that time period was -38%
3. Even the Nasdaq crashed almost -20% during that same Q215-Q116 period

The lesson?

Get the trending rate of change in both GROWTH and PROFITS right, and you’ll get a lot of other big things in macro right. Then you won’t have to spend your time gawking like a Macro Tourist at one-off data points and MSM memes.

Again, today isn’t the day to buy stocks. Yesterday was a great day to book gains in things like Tech (XLK) and Financials (XLF). It was also a nice day to watch those short positions in the Long Bond (TLT) not rip your face off like most US Equity shorts have.

Will we get another layup pullback in US growth stocks like we did on the political news last week?

1. Layup’s are rare in this game
2. But pullbacks happen, a lot
3. If they’re politically driven, all the better

So let’s just raise some cash again here… and wait… and watch.

This game is hard when you’re forced to chase high and sell low. That’s what really kills you.

Our immediate-term Global Macro Risk Ranges (intermediate-term TREND views in brackets) are now:

UST 10yr Yield 2.37-2.55% (bullish)

SPX 2332-2395 (bullish)
RUT 1355-1393 (bullish)

NASDAQ 5838-5937 (bullish)

VIX 10.62-13.11 (bearish)
USD 99.03-100.75 (bullish)
EUR/USD 1.06-1.08 (bearish)
YEN 110.07-113.60 (bearish)
Oil (WTI) 48.55-50.76 (bearish)

Gold 1226-1264 (bearish)
Copper 2.60-2.70 (neutral)

AAPL 139.18-144.99 (bullish)

AMZN 851-879 (bullish)

FB 139-144 (bullish)

Best of luck out there today,

KM

Keith R. McCullough
Chief Executive Officer