Many thanks to those of you who tuned into our Q2 2018 Macro Themes presentation earlier today. We are grateful for and humbled by the again-record attendance. For those of you who weren’t able to join us live, please CLICK HERE to access the webcast and audio-only replays and associated slides.
2Q18 Macro Themes:
- USA: #Peak Cycle?: After 6 consecutive quarters of accelerating growth and bullish quantitative signaling, our model is mapping a peak and prospective negative inflection in domestic economic growth as we move into 2H18. We’ll review and contextualize the recent shift in market and macro dynamics and detail the fundamental, base effect and risk management dynamics driving our expectation for a downshift to Quads 3 and 4 in the back half of the year. We’ll specify the risks to the consensus outlook and how to optimize positioning for the chop associated with emergent phase transitions in growth and volatility.
- Global #Divergences, Reiterated: Cross-asset volatility has conspicuously emerged amid consensus calls for an ongoing “globally synchronized recovery” and an extrapolation of cycle-peak GDP growth rates in the U.S. through year-end. As such, we feel compelled to reiterate our non-consensus view that global growth momentum has broadly dissipated. The only strategist that seems to agree with our view is Mr. Market himself.
- Dollar #Bottoming?: We have recently asked the rhetorical question, “Is the [U.S.] dollar the new VIX?” Peak dollar bearishness came midway through Q1 which was driven by carry trades and fund flows associated with the low-volatility, global growth accelerating backdrop of 2017. We’ll outline reasons and provide specific set-ups to exemplify why a reversal in the U.S. dollar continues to be a major risk to aging consensus fund flow narratives.
Best of luck out there risk managing these emergent phase transitions in growth, inflation and profits. We strongly encourage you to steer clear of macro tourist narratives in the process.
-The Hedgeye Macro Team