In the YTD there have been few places for investors to hide in GLL Land, as all of the GLL subsectors underperformed the market and consumer discretionary benchmarks.
However, as shown by the blue bars below, much of this underperformance has come in a very short span of time, and the span of time does in fact line up with when Hedgeye’s macro team begun flagging the risk that “Quad 4” i.e. the 2nd derivative of growth and inflation were set to simultaneously slow in Q4 2018 and Q1 2019.
The subsector performance within GLL is almost textbook relatively to historical precedent in Quad 4. A lot of factors impact stocks and, certainly, smaller cap and highly leveraged companies have seen their stocks plummet due to higher rates and more of the Quad 4 scenario priced in.
Given that our Macro guys see continued pressure on growth and inflation expectations, we’d probably be looking to get incrementally more negative on certain areas of GLL, but we’re sensitive to price and timing.