“We can’t help everyone, but everyone can help someone.”
-Ronald Reagan
Given the tragedy that many Texans and their loved ones are experiencing right now, I thought that was an appropriate quote and tone for the country this morning. We should always make time to help someone.
Time on God’s good earth is as precious as any “asset allocation” we’ll ever make. One of my favorite quotes about time came from a David McCullough speech to a joint session of Congress called Simon Willard’s Clock:
“It’s a clock with two hands and an old-fashioned face, the kind that shows what time it is now… what time it used to be… and what time it will become.”
Back to the Global Macro Grind…
What time is it? It’s also time for me to get back to work this morning. After spending the last week up on Lake Superior, I’m back in the Stamford, CT saddle this morning, ready to help.
One of the most important ways we try to help you is by contextualizing immediate-term (weekly) market moves within the context of intermediate-term (3 months or more) macro TRENDS.
From a FICC (Fixed Income, Commodities, and Currencies) perspective, here are 10 callouts from last week:
- US Dollar Index Down (on Dovish Fed) -0.7% to -9.3% YTD
- EUR/USD +1.4% on the week to +13.4% YTD
- Yen (vs. USD) -0.1% on the week to +7.0% YTD
- Commodities (CRB Index) +0.2% on the week to -7.6% YTD
- Oil (WTI) -1.6% on the week to -16.1% YTD
- Gold +0.5% on the week to +11.3% YTD
- Copper +3.2% on the week to +21.0% YTD
- Corn -3.3% on the week to -7.0% YTD
- Hogs -4.6% on the week to -3.7% YTD
- UST 10yr Yield -3 basis points on the week to 2.17% (-28bps YTD)
In summary, those 10 moves = 2 words (Reflation’s Rollover). Dollar Down, Rates Down, Dovish Fed – that’s not a debate anymore. It’s a macro consensus that remains right.
Fortunately, macro tourists who have tried to eat copper instead of corn are realizing what Gold has. Food prices are a much more important component of headline inflation and/or the Fed’s PCE read than base metals are.
The other thing that happens with Rates Down is that the Financials (XLF) underperform and that keeps the US stock market’s immediate-term @Hedgeye Risk Range #range-bound.
While I’ve been a chronic buyer of US Growth Beta on 2017 dips, I’ve also started selling the rips in August. With one of my big fundamental catalysts gone (Earnings Season #Accelerating), I’ll probably do the same in SEP too.
We saw another nice rip in 2 of our favorite US Equity Sector Styles last week:
- US Biotech Stocks (IBB) led the charge, +2.3% on the week to +17.2% YTD
- US Tech Stocks (XLK) beat the SP500 again, adding another +1.1% on the week to +19.3% YTD
*Note: when I’ve signaled buy-the-damn-dips since June, I haven’t signaled buy on things like:
A) Low-Beta, Slow-Growth, US Consumer Staples Stocks and/or
B) “Cheaper” (than US Growth) European Stocks
Not only would that have been un-growthy of me, but it would be unprofitable:
- Consumer Staples Stocks (XLP) were DOWN -1.0% last week to +5.7% YTD
- EuroStoxx 600 was FLAT last week at +3.5% YTD
- Spanish Stocks (IBEX) were DOWN -0.9% last week at 10.5% YTD
Put another way, even if we weren’t pounding the table on being long US Growth (as a Style Factor) and we said buy US Equity Beta (SP500) instead of European Equity Beta (EuroStoxx 600), we’d be quite happy with the summer.
With US Equity Volatility (VIX) crashing -21% last week to 11.28, I know it might be weird for people screaming bloody murder about “corrections” all summer, but the SP500 has been UP for 7 of the last 9 weeks…
That said, you don’t buy AFTER they ramp the bears. You buy when the US stock market and/or the factors, sectors, and stocks you like within the market are signaling immediate-term #oversold.
There will be a time to make that call again. That time is not now. The time to buy the last 6-12 dips was then. The time for buying the next one will be up to Mr. Market.
Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND views in brackets) are now:
UST 10yr Yield 2.14-2.23% (bearish)
SPX 2 (bullish)
RUT 1 (bearish)
NASDAQ 6 (bullish)
Nikkei 197 (bearish)
DAX 12058-12283 (bearish)
VIX 9.75-15.39 (bearish)
USD 92.50-93.90 (neutral)
Oil (WTI) 46.49-48.90 (bearish)
Nat Gas 2.78-3.02 (bearish)
Gold 1 (bullish)
Copper 2.90-3.10 (bullish)
Best of luck out there this week,
KM
Keith R. McCullough
Chief Executive Officer
