Monthly Macro Themes Monitor: Just When You Thought It Couldn’t Get Much Worse…

01/07/19 07:10PM EST

Below is a detailed summary of our active Macro Themes. The analysis below is sourced from our daily Global Macro Risk Monitor note. Please email if you aren’t yet receiving that piece and would like to be added to the distribution list. Please note, however, that access is expressly reserved for key client relationships.

Quad 4, Then Quad 3 (introduced 9/27/18 under the title, “#Quad4”)

Earnings vs. Credit Cycle (introduced 9/27/18 under the title, “#CyclicalPeaks”)



Long Ideas: Housing, Gold, etc. (introduced 9/27/18, under the title, “#LongHousing”)


  • 12/31: Disinflation Is Not Just A Strong Dollar Phenomenon: The view that the weak currencies would continue to inflate European and Asian inflation statistics from their respective Q3/Q4 cycle-peaks has given way to obvious disinflation born out of cycle-peak comparative base effects: Spain EU Harmonized Headline CPI ↓ -50bps to 1.2% YoY in DEC; Germany EU Harmonized Headline CPI ↓ -50bps to 1.7% YoY in DEC; South Korea Headline CPI ↓ -70bps to 1.3% YoY in DEC; and South Korea Core CPI ↓ -10bps to 1.3% YoY in DEC. Each of those countries should see inflation slow through at least 3Q19E (ES, DE, SK) – a material anchor on global bond yields for 2019. We reiterate our bullish bias on duration across non-credit-oriented global sovereign debt markets, including the one that has the greatest amount of investors positioned offsides for further tightening (of yields) – i.e. US Treasuries.


#StrongDollar (introduced 4/3/18 under the title, “#DollarBottoming?”)



#ShortEM (introduced 1/4/18 under the title, “#UnderweightEM”)



#GlobalDivergences (introduced 1/4/18)

  • 12/25: Global Policy: Choking Off Growth Worldwide
    • Did you know that throughout 4Q18-to-date, global central banks have tightened benchmark monetary policy rates by a cumulative +325bps, adding to +2100bps of hikes already seen in the YTD through 3Q18.
    • If you assume there’s a lagged impact to meaningful shifts in monetary policy (we do – if only because central banks only tighten at high “levels” of Nominal GDP growth, which, by definition, create difficult comparisons in out-quarters), then the aforementioned “Globally Coordinated Tightening” represents a material and underappreciated drag on global growth heading into 2019 – yet one more reason for investors to avoid trying to pick bottoms in and across crashing equity markets worldwide at the current juncture.
    • Recall that a reversal of the multi-year easing cycle across EM was among the primary reasons we anticipated both a reversal in what had been trending EM equity and FX outperformance, as well as a general slowdown in global economic activity throughout 2018 at the start of the year.
    • And, though we’ve seen that view come to fruition in both reported data and market price terms, the negative impact of all the aforementioned tightening doesn’t simply fail to exist. Said differently, what is the recorded bull case for global economic growth? We know precisely what the bear case its – i.e. tough comps, tightening financial conditions, waning consumer/business/investor confidence, etc.
    • Brazil remains the only major economy in the world that has eased monetary policy on a trending basis, which is why its growth dynamics – and markets; Bovespa +9.9% T3M – continue to stand apart from the rest of the world.
  • 1/7: Global Growth Ends 2018 on the Lows: The JPM Global Composite PMI ended 2018 at 52.7 – its lowest level since SEP ’16, which is not good considering the onslaught of increasingly difficult comparisons for global growth here in the first three quarters of 2019. The weakness in PMI readings was broad based, both in terms of components and economies. Highlights include:  

Best of luck out there managing these evolving macro risks! As always, please feel free to reach out anytime to the extent we can be of any assistance in that process.

Kind regards,


Darius Dale

Managing Director

Monthly Macro Themes Monitor: Just When You Thought It Couldn’t Get Much Worse… - Global Macro Risk Monitor

CLICK HERE to download the table in Excel.

© 2020 Hedgeye Risk Management, LLC. The information contained herein is the property of Hedgeye, which reserves all rights thereto. Redistribution of any part of this information is prohibited without the express written consent of Hedgeye. Hedgeye is not responsible for any errors in or omissions to this information, or for any consequences that may result from the use of this information.