Global Equities Aren't For Me

“People are effective because they say no, because they say this isn’t for me.”
-Peter Drucker 

Looking for some self-improvement tips this morning? I always am. 

Performing in macro markets loaded with #GlobalDivergences isn’t easy. Just saying “no” to a lot of Global Equity Exposures when they’ve bounced has been critical to beating your competition in March of 2018.

Unless the SP500 can recapture what was @Hedgeye TREND support of 2699, it will join the many major stock markets in both Asia and Europe that have been signaling Bearish @Hedgeye TREND for the last 2 months.

Back to the Global Macro Grind…

It’s Macro Monday! Let’s get after it and deliberately study what happened in macro markets last week within the context of @Hedgeye TRADE, TREND, and TAIL durations.

Globally, it was ugly out there for Equities:

1. SP500 dropped -6.0% last week to -3.2% YTD and is now signaling Bearish TREND @Hedgeye
2. NASDAQ corrected -6.5% last week to +1.3% YTD and is barely Bullish TREND @Hedgeye
3. Russell 2000 fell -4.8% last week to -1.7% YTD and remains Bearish TREND @Hedgeye
4. EuroStoxx600 lost another -3.1% last week to -6.0% YTD and remains Bearish TREND @Hedgeye
5. Germany’s DAX fell another -4.1% last week to -8.0% YTD and remains Bearish TREND @Hedgeye
6. Swiss stocks corrected another -3.5% last week to -8.7% YTD and remain Bearish TREND @Hedgeye
7. London’s FTSE dropped another -3.4% last week to -10.0% YTD and remains Bearish TREND @Hedgeye
8. Japan’s Nikkei lost another -4.9% last week to -9.4% YTD and remains Bearish TREND @Hedgeye
9. China’s Shanghai Comp fell another -3.6% to -4.7% YTD and remains Bearish TREND @Hedgeye
10. Russia’s RTSI gained +0.6% last week to +9.3% YTD and remains Bullish TREND @Hedgeye 

“So”… if you’re saying 1 out of the aforementioned 10 being Bullish TREND @Hedgeye ain’t bad, you’re right. That’s terrible. 

Even though I’ve had considerable pushback on the European Equity Risk side for the past 6 months, this is why Global Equities aren’t for me. We reiterated both #GlobalDivergences and that Global Inflation Expectations were too high back in JAN 2018.

Since there were growth components of the US Equity market I’ve liked more than I do this morning, let’s look at what happened from a US Equity Sector Style perspective last week:

1. Tech (XLK) led losers last week at -7.7% = +0.5% YTD
2. Financials (XLF) were a close 2^nd to worst at -7.1% last week = -3.9% YTD
3. Consumer Discretionary (XLY) corrected -4.8% last week = +1.5% YTD
4. Consumer Staples (XLP) dropped another -4.5% last week = -10.6% YTD
5. Industrials (XLI) fell -5.0% last week = -3.9% YTD

Yep, I used the word “liked” this morning for our two favorite sectors in the SP500. That’s why I wasn’t buying-the-damn-dip in either in Real-Time Alerts when the SP500 snapped my @Hedgeye TREND signal level last week. I might like them lower.

The fundamental research #process (GIP model that gives us quadrants and asset allocations) isn’t the only thing risk management tool I use. My quantitative signaling #process matters more, most of the time, as it front-runs the research!

Like data, markets are leading indicators. When I just say “no” on buying a dip, it means my signals don’t see it as a dip.

What else happened out there in Global Macro last week:

1. US Dollar had its 1^st down week in the last 5 closing down -0.9% week-over-week at -2.9% YTD
2. EUR/USD was +0.5% to the top-end of the @Hedgeye Risk Range at $1.24 = +2.9% YTD
3. British Pound was up another +1.4% last week to +4.6% YTD and remains Bullish TREND @Hedgeye
4. Commodities (CRB Index) were +0.9% last week to +1.2% YTD
5. Oil (WTI) was the big gainer (hence Russia #Bullish) up +5.6% last week to +9.3% YTD
6. Copper was one of the big losers (#ChinaSlowing) down -3.7% last week to -9.7% YTD  
7. Rubber was down another -7.7% last week to -17.4% YTD
8. Aluminum was down another -1.8% last week to -10.4% YTD
9. UST 2yr Yield was down -4 basis points last week to 2.25% (+37bps YTD)
10. UST 10yr Yield was down -3 basis points last week to 2.81% (+41bps YTD)

That’s right. Bond Yields went DOWN on the week of the US Federal Reserve RAISING interest rates. Why? Again, because markets are leading indicators. As European growth and inflation data continued to slow:

A) Italy’s 10yr Yield dropped another -11 basis points last week (-14bps YTD)
B) Spain’s 10yr Yield fell another -11 basis points last week (-30bps YTD) 

Have European bond yields (and stock markets) been falling all year long on Trump tourism headlines? C’mon. That’s why you aren’t a Macro Tourist. Just say no to chasing headline-to-headline and focus on measuring and mapping time-series to time-series, eh.

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

UST 10yr Yield 2.78-2.90% (bullish)
SPX 2 (bearish)
RUT 1 (bearish)
NASDAQ 6 (neutral)
Nikkei 209 (bearish)
DAX 115 (bearish)
VIX 16.21-27.82 (bullish)
USD 88.75-90.18 (neutral)
EUR/USD 1.22-1.24 (neutral)
GBP/USD 1.39-1.42 (bullish)
Oil (WTI) 59.45-66.30 (bullish)
Nat Gas 2.49-2.77 (bearish)
Gold 1 (bullish)
Copper 2.92-3.08 (bearish)

Best of luck out there this week,

KM

Keith R. McCullough
Chief Executive Officer