We've been telling investors for some time now that global growth is picking up, get long stocks. "Many active managers are simply not long enough in the context of how good the fundamentals have been," Senior Macro analyst Darius Dale wrote recently.
Good advice. European equities are up as much as 4.5% this morning in the wake of the French election results. Japan's Nikkei popped, +1.4%. Meanwhile, in the U.S., the Nasdaq and Russell 2000 were up 1.8% and 2.6% respectively last week as the positive first quarter earnings results came rolling in. As Hedgeye CEO Keith McCullough writes in today's Early Look, "Raging bull markets have an uncanny ability to find new catalysts."
Here's a look at what's happening in macro markets this morning, with brief commentary and key charts.
1. French Election & European Equities
Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. Since neither candidate was able to capture the 50% needed to declare victory a runoff vote is scheduled for May 7th.
But with some of the uncertainty surrounding the vote finally lifted, France's CAC 40 was up 4.5% today. German equities hit all-time highs on the news, up +3%. Italian equities were up 4.4%.
2. Gold ↓, Bond Yields ↑
Gold fell and global bond yields popped today. Gold is down -1.4% this morning. Meanwhile, the US Treasury 10-year yield backed up to 2.30% (from 2.15% last week). The German 10-year Bund yield ramped back to 0.36%. It got as low as 0.15% last week.
With rates up globally, it's no surprise gold is down. The yellow metal trades on real growth and real interest rate expectations. It's simple really. Rates are up and with some clarity surrounding the French election, gold fell.
3. U.S. Earnings ↑... Tech ↑... Energy ↓
The Nasdaq made another all-time high last week. It was up +1.8% on the week as corporate profits continue to accelerate. So far 16 of 100 names in the Nasdaq have reported an aggregate year-over-year EPS acceleration of +46%.
The performance within the S&P 500 reflects this strengthening of U.S. corporate profits and the broader resurgence of the U.S. economy. Classic U.S. economic growth accelerating sectors like Consumer Discretionary (XLY) and Tech (XLK) were up +2.0% and +1.5% last week, respectively.
Setting aside the U.S. equity leaders, as inflation continues to fall, Energy stocks (XLE) continue to lag. We say stay away from Energy stocks and commodities more broadly.
Two weeks ago, the Consumer Price Index slowed from 2.74% year-over-year in February to 2.38% in March. In our recently released Q2 Macro Themes we predited this in our theme Reflation's Rollover. The Energy sector fell -2.2% last week to -10.0% year-to-date. The CRB Index of commodities was down -3.1% last week and -4.0% in the last 6 months.
This just in...