McCullough: What Apple + FedEx Have In Common

Whether it was Fedex (FDX) or Apple (AAPL) or any of the many companies that will guide lower on both revenues and earnings in the coming months, what will all of these international companies have in common? 

A) US Growth and #InflationSlowing from Q318’s Cycle Peaks
B) #ChinaSlowing
C) #EuropeSlowing
D) #StrongDollar
E) US Corporate #ProfitsSlowing from Q318’s Cycle Peak 

A: all of the above. 

While the summary of A, B, C, D, and E = Quad 4, and many of you have been kind in complimenting us on making that call on The Cycle when it mattered back in September, that was only Theme #1 in Q4 of 2018 @Hedgeye. 

Theme #2 was called #CyclicalPeaks and here’s how Jedi Cycle Master Darius Dale explained that in the SEP @HedgeyeTV presentation invite:

• #CyclicalPeak: Two of the most underappreciated risks heading into Q4 of 2018 among investor consensus are the cyclical peaks in corporate profit growth and corporate profit margins – both of which have important sector and style factor implications. We’ll detail why investors would do well to adopt a defensive posture with respect to their respective portfolios as the associated rotation out of the domestic Momentum, High Beta, and Growth style factors could be quite violent given current positioning.

Cool.

Tim Cook should have paid for a Hedgeye Macro subscription like a growing number of corporate clients we have did.

Those executives are not only proactively prepared for probable mean reversion risks in big macro factors like GROWTH, INFLATION, and PROFITS, but they have more credibility than those who guide lower using scarecrow excuses like “Trade War.”

By the way, I didn’t see Cook or the Fedex Execs doing i-Phone demand dances in Q2 and Q3 of 2018 blaming “Tax Reform” for part of the upside! As you can see in our Chart of The Day (slide 62 of our Q4 Macro Themes deck):

1. Q2 of 2018 is when The ROC (rate of change) in year-over-year US Technology Earnings Growth peaked at +32.0% y/y
2. Q3 of 2018 is when The ROC (rate of change) in year-over-year US SP500 Earnings Growth peaked at +26.1% y/y