Below are Hedgeye CEO Keith McCullough's three key takeaways from today's edition of The Macro Show. For more access to more insight and analysis, click here for significant savings on your subscription to The Macro Show.)
1. Stock Market Hits All-Time Highs
“So what did global equities do into and out of the government shut down? They went up. We hit all-time closing highs on Friday. All-time closing highs in the S&P 500, Nasdaq, Russell 2000. At the end of the day government shut downs have not mattered to the U.S. stock market in quite some time. And the next catalyst is what? The government re-opening.
Just look at the S&P 500 sector returns. As U.S. growth continues to accelerate, they continue to be precisely what we thought they would be. Our least favorite sector, Utilities (XLU), was down again on Friday and our favorite sectors, Tech (XLK) and Consumer Discretionary (XLY), are up. In other words, growth sectors are beating slow growth, yield sensitive sectors.”
2. Investors Bought the All-Time Highs With Conviction
“That damn data will set you free. So what did volume do on Friday as the market went to all-time highs? It went up.
Volume was up 15% versus the prior day and up 13% versus the three month average. That relationship continues to hold. What is price doing on down days? It’s decelerating. What is it doing on up days? It’s accelerating.”
3. The U.S. Economy is (Still) Accelerating
“Now, remember when everyone was whining about the hard versus the soft. See this right there (see circled below)? This was when every Macro Tourist was saying, ‘The hard data isn’t as good as the soft data.’ And then rip! Straight up.
And now you know what everyone at Zero Hedge is talking about now on the hard data versus the soft data? Absolutely nothing. They’re on to the next thing that gets you to click and generate some ad revenue.
Now this is important. Right now, on the 37-month high in Industrial Production growth, our year-over-year GDP estimate is 2.7% for the fourth quarter that gets reported on Friday. So let’s give everyone in Davos a heads up. What our estimate imputes to, based on how Wall Street tracks GDP (quarter-over-quarter SAAR), is 3.31% versus an estimate of 2.7% for Bloomberg consensus.
The point is that Wall Street has been wrong on growth. If we get a little bit of a rollover on inflation, growth will be even better since inflation subtracts from nominal growth.
Once that 4Q 2017 GDP number comes out on Friday that will remind you why you’ve been crushing it buying every damn dip. U.S. growth is accelerating.”