The Macro Point

01/04/18 08:45AM EST

“Winning is fun… Sure. But winning is not the point.”
-Pat Summitt

 So what is the point about waking up when it’s pitch black outside, measuring and mapping macro markets, and building an apolitical and data driven independent research firm with no conflicts of interest? 

“Wanting to win is the point. Not giving up is the point. Never letting up is the point. Never being satisfied with what you’ve done is the point.” –Pat Summitt, Coach of University of Tennessee Lady Vols Basketball Team (1, died 2016)

When she retired in 2012, Summit Teams amassed a winning record of 1,098-208 (.841), 16 SEC Regular Season Championships, and 8 NCAA Championships. I think that’s one of the best leadership quotes about winning that I’ve ever read. Rest in peace, Pat.

The Macro Point - summitt 

Back to the Global Macro Grind…

Is your business hostage to the new MiFID II deadline in Europe? Are you running a business affected by it in the USA? Do you wake up every day with the entire edifice of the Old Wall and its politicized media wishing you got hit by a bus?

Well, after 10 years of building this firm, I guess not everyone wishes I went away. That’s too bad. I’ve lived my entire life being the guy a lot of people bet against. I need that. Winning is fun. But wanting to prove you are better than people think you are is the point.

Rather than whining about MiFID II and the commensurate research budget cuts some of our clients are making, I have my team squarely focused on winning new business and taking share from those who aren’t built to survive this phase of The Game.

So far, so good.

One of the biggest areas of competitive advantage we’ve built over the past decade @Hedgeye is providing CIO’s and Portfolio Managers around the world a market practitioner’s Global Macro Risk Management product/service.

Put simply, we get PMs to where the proverbial macro puck is going (after contextualizing where it’s been).

On the front-end of our macro research communication process is:

  1. The Top 3 Things Happening In Global Macro (sent to an Institutional Investor Distribution daily before 6AM EST)
  2. Our Global Macro @Hedgeye Risk Ranges for over 2 dozen macro markets (daily before 630AM EST)
  3. The Early Look (daily, usually before 8AM EST)

Today, the Early Look is late due to:

A) A blizzard in Connecticut
B) My focus on today’s Q1 2018 Macro Themes Conference Call (at 11AM EST)

Our Macro Themes calls are quarterly and generate more Institutional Investor attendance/interest than any other point-in-time content we produce at the firm. The slide deck page count is approximately 100, and I present it live on @HedgeyeTV in around 40 minutes.

Here are the summary points for the Top 3 Global Macro Themes @Hedgeye:

  • Reflation’s Rollover II:  Sequels are rarely as good as the original but with harder comps, a broad deceleration across major componentry in the CPI/PCE price baskets and the Sept-Dec reflationary impulse now largely rearview, we’re likely to see our second round of Reflation’s Rollover in less than a year. And with growth poised to accelerate for a 6th consecutive quarter in 1Q18, a lower deflator should help drive a GIP rotation back into #Quad1. We’ll detail the growth and inflation outlook domestically and revisit why the shift between inflation accelerating and decelerating is key for picking alpha-generating sector and asset class exposures.
  • #GlobalDivergences: In contrast to relying on financial media soundbites, idea dinners or surveys, our views on the global economy are instructed by sophisticated predicting tracking algorithms – which we run for every investable economy in the world. While investor consensus remains committed to the “globally synchronized recovery” narrative heading into 2018, our models are signaling quite the opposite and that outcome should perpetuate a number of meaningful pivots in asset allocation terms throughout the investment management landscape. We’ll detail which of those you cannot afford to miss out on to start the year.
  • #UnderweightEM: 2017 was an epic year in terms of risk-adjusted returns and portfolio flows across the EM investment landscape for a variety of fundamental reasons – not the least of which was six consecutive quarters in #Quad1 at the aggregate GIP level. The first half of 2018 will likely see a pickup in volatility and credit spreads as said fundamental tailwinds are eroded, at the margins. We will detail why we believe global investors would do well to rotate out of EM and into DM, as we expect the former to underperform over the intermediate term. We will also make the case for why EM-dedicated investors would do well to high-grade their portfolios by rotating into minimum volatility securities, consumer staples and IG credit in lieu of reflation-oriented cyclicals and HY credit.

Will we absolutely nail every single Macro Theme? Maybe. If we don’t, that’s still one of our goals.

Another goal is to have our clients think through a rate-of-change-data-driven (as opposed to political, qualitative, or valuation driven) scenario analysis on why we consider something “probable” when the Old Wall and its consensus considers it improbable.

Whether it was our US #GrowthSlowing call in 2008 or our US #GrowthAccelerating call of 2017, unlike most firms people pay for “macro research”, we have a successful track record of going both ways.

Am I satisfied with our “macro calls” as of late? Sure. But, like I said, nailing every one of these isn’t the point. Wanting to nail big accelerations and decelerations in both markets and data is. Never letting up is too.

Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND views) are now as follows:

UST 10yr Yield 2.39-2.52% (bullish)
SPX 2 (bullish)
RUT 1 (bullish)
NASDAQ 6 (bullish)
Nikkei 225 (bullish)
DAX 129 (bullish)
VIX 8.88-10.41 (bearish)
USD 91.27-93.20 (bearish)
EUR/USD 1.18-1.20 (bullish)
Oil (WTI) 58.14-62.02 (bullish)

Best of luck out there today,


Keith R. McCullough
Chief Executive Officer

The Macro Point - 01.04.18 EL Chart

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