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To help contextualize this morning's market moves around the world, below are insights and analysis from our research and Hedgeye CEO Keith McCullough's Twitter feed.
USA
Stock market bears have been "shorting the wrong sector (and style factors) in 2017" based on wrongheaded valuation concerns, writes Hedgeye CEO Keith McCullough this morning. Utilities and Consumer Staples are easily the 2 most expensive US Equity Sectors.
https://twitter.com/Hedgeye/status/912305752978722816
Europe
Here's the truth about Germany this morning. Following Sunday elections, German Chancellor Merkel loses support, but set for fourth term in power. Merkel's Christian Democratic Union party got about 33% of the vote. This was the party's worst showing since 1949. Even worse, the Social Democrats received 20% of the vote, its worst showing ever.
https://twitter.com/KeithMcCullough/status/912245756911915008
And then there's London...
https://twitter.com/KeithMcCullough/status/912244803433312256
Spain looks just nasty...
https://twitter.com/KeithMcCullough/status/912246100194668544
On the economic outlook... ECB President Mario Draghi says at a press conference this morning: "the ongoing recovery is, crucially, driven by domestic forces, and the labor market has notably improved... We will decide later this year on a re-calibration of our instruments that maintains the degree of monetary support that the euro area economy still needs to complete its transition to a new balanced growth trajectory characterized by sustained conditions of price stability."
We think Draghi will ultimately be the most dovish central banker in the world as the Eurozone economy slows. Here are "3 Reasons to Be Bearish on Europe."
https://twitter.com/KeithMcCullough/status/912312322567364608
ASIA
The outlook for Japan doesn't look so hot but, in terms of risk managing your equity market exposure there, the simple takeaway is: Up Dollar, Down Yen = Up Nikkei.
https://twitter.com/KeithMcCullough/status/912242278122639360
https://twitter.com/KeithMcCullough/status/912240708374982662
https://twitter.com/KeithMcCullough/status/912240708374982662
Meanwhile in China, the ongoing slowdown in the country's real estate market (that is being caused by waning PBoC stimulus) hasn't been hitting the Hang Seng. We've explained before why investors shouldn't short Chinese equities but commodities could take a hit.
https://twitter.com/KeithMcCullough/status/912243061652156421
And here's the latest signal on India...
https://twitter.com/KeithMcCullough/status/912244203698126848
Commodities
Our call on Reflation's Rollover (from April) has been hammering commodities for much of this year. Basically, the Consumer Price Index peaked in February and has been rolling over ever since. We expect this trend to continue to hit commodities like Corn.
https://twitter.com/KeithMcCullough/status/912247524211216384
Want to better understand the big picture macro market developments? Sign up for more information about our soon to be released weekly newsletter Market Edges.
