“It is impossible for Athenians either to enjoy peace and quiet themselves, or to allow anyone else to.”
-Thucydides
Ironically, the only peace and quiet I’m going to get over this holiday week is to get up and work between 4 and 7AM. I have four kids under the age of 11. The rate of change of the noise in this house ramps, big time, between 7 and 8AM!
The aforementioned quote comes from Chapter 5 of Graham Allison’s Destined For War where he asks us to imagine if China were just like us. “Americans enjoy lecturing Chinese to be more like us. Perhaps they should be more careful what they wish for.” (pg 89)
Altogether, this reminds me of one of the most important lessons @Hedgeye in 2017 – to try to empathize with everything we might not selfishly consider. If we open our minds and look hard enough, it gets easier to see.
Back to the Global Macro Grind…
With only 2 trading days left in the 2017 season, anything can happen… but I doubt the score is going to change much. Especially if you were long US Growth Stocks, The Game was a lot of fun this year. By next week, The Game starts all over again.
Will it be 2,700 on the SP500 or 7,000 on the Nasdaq? What will come first? Or will we see both unprecedented milestones in US stock market history at the same time? That would be fun too.
With the top-ends of my @Hedgeye Risk Ranges at 2700 and 7019 for those two major US Equity Indices, respectively, I guess the Old Wall might call those my “price targets.” Unlike the establishment though, my target of “higher” changes, dynamically, every day.
When my “target” for US stocks is lower, I’ll let you know.
Unlike US growth, our views have been changing over the course of the last 3-6 months on both China (slowing) and the South of Europe (slowing). On our Q1 of 2018 Macro Themes Call we’ll be introducing some EM countries that we think could slow too.
Whether it be relative or absolute returns or the performance of sovereign bond yields, we’re already seeing Mr. Market agree with our view of Globally Synchronized #Divergences.
The “Globally Synchronized Recovery” that consensus sees is mostly rear-view now.
To summarize our forecasts heading into the 1st half of 2018:
A) Our view on US GDP growth remains higher than consensus
B) Our view on Global GDP growth is heading lower than consensus
Some of the biggest risks to these views are:
A) Northern European GDP Growth (especially IP, Exports, etc.) accelerates alongside the recent DEC Reflation (Oil)
B) Southern European Consumption Growth bounces back from its recent slow-down
C) China keeps making up their GDP numbers
And, of course, the risk on making any call on EM is that the perception of the call is an all-or-nothing one. In reality, “EM” is becoming much more divergent than it has ever been, especially when we break apart GIP models by Emerging Market country.
As always, if risks (i.e. the data and/or market signals) change, our goal will be to change our “views” and “targets” alongside those changing risks. While I can empathize with those who stay wrong for too long in this business, I don’t aspire to be like them.
I do aspire for a little more peace and quiet this morning, however. It’s 6:46AM, so I’ll sign off for 2017 before all hell breaks loose in this household. Wishing you all the best of luck and health for a prosperous new year! -KM
Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND views in brackets) are now:
UST 10yr Yield 2.34-2.53% (bullish)
SPX 2 (bullish)
RUT 1 (bullish)
NASDAQ 6 (bullish)
XOP 35.41-38.35 (bullish)
RMZ 1130-1185 (neutral)
Nikkei 224 (bullish)
DAX 125 (bullish)
VIX 9.14-10.79 (bearish)
USD 92.25-93.51 (neutral)
EUR/USD 1.17-1.19 (neutral)
YEN 112.15-113.71 (bearish)
GBP/USD 1.33-1.35 (bullish)
Oil (WTI) 56.31-60.20 (bullish)
Nat Gas 2.57-2.92 (bearish)
Gold 1 (bearish)
Copper 3.07-3.32 (bullish)
AAPL 169.70-177.22 (bullish)
AMZN 1160-1196 (bullish)
FB 175-182 (bullish)
GOOGL 1047-1088 (bullish)
NFLX 184-192 (neutral)
TSLA 308-330 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
