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"What’s the main thing about bull markets? They go up, and up, and up the elevator. And then they take the window on the way out.” |
Are you bearish enough—do you understand what could trigger a market selloff?
Below are some key takeaways transcribed from our recent webcast hosted by CEO Keith McCullough and Senior Macro analyst Darius Dale. Also below is the replay for the entire 39-minute webcast.
Keith McCullough: So, first things first. Where are we? If you look backwards we’ve seen 7 consecutive quarters of accelerating economic growth. That only happened one other time in the 1990s. If you followed us, we obviously had the high on Wall Street for U.S. GDP forecasts for 5 consecutive quarters.
So you should’ve been long growth. And that’s been the point we’ve been making for over a year now.
Expensive gets more expensive when growth is accelerating. I loved expensive stocks because they were expensive. But now, what happens when growth starts to slow? Expensive gets less expensive, which is already starting to happen in the stock market.
McCullough: Let’s look at performance. This is the year-to-date. So “Captain Pie-Chart” guy—who’s long everything in the world and down year-to-date—what say you about global growth? Is it in ‘synchrony’ or is it ‘diverging’?
As you can see, last year was a globally synchronized recovery where we were all making money buying every damn dip in everything. Now, year-to-date, the Nikkei, Shanghai Comp, and the All World index are all struggling. 2018 is not 2017.
This is not good.
These are big issues and global bond yields nailed this. The rest of the world is slower for longer and inflation falling and the U.S. is late cycle with inflation accelerating. That’s the whole point of this. The U.S. is late cycle.
McCullough: Now, this is classic Hedgeye. Let’s look at the rate of change in key economic data.
Have Retail Sales peaked? Probably.
What about the peak in High Ticket Consumer Discretionary? That’s not an opinion. That already peaked.
Next chart.
Is there a peak in Consumer Confidence? The most recent report is lower than the last one. And if this chart comes off the highs, it would be a dramatic decline from these levels.
I’m not saying everything will peak, then evaporate all at once. But you have to think about this. What’s the main thing about bull markets? They go up and up and up the elevator and then they take the window on the way out.
So we’re highlighting whether or not you’re bearish enough. Do you understand the components that could make the market go down? They’re largely economic driven, in particular driven by growth, inflation and profits.
