• [WEBCAST] Raoul Pal & Neil Howe: A Sobering U.S. Economic Reality Check

    Prepare your portfolio for “big picture” paradigm shifts with Real Vision co-founder Raoul Pal and Demography analyst Neil Howe. Watch the replay from this webcast.

“I mean, really… explore the space. I like what I'm hearing. Roll it.”
-Christopher Walken 

As the US economic cycle was peaking back in Q2 of 2000 (SPX EPS Growth Peaked at +23% growth in Q3 of 2000, then got smoked to -18% by Q3 of 2001), Saturday Night Live did one of the funniest skits I’ve ever seen: More Cowbell

We’ve often used the aforementioned instructions by Christopher Walken to Will Farrell as a metaphor for what perma bulls in Old Wall Media need from the Fed whenever the economy slows and the stock market falls. 

They sure got what they were begging Powell for yesterday. Gold and Treasury bulls @Hedgeye did too!

More Fed Cowbell! - z 1 30 2019 3 09 43 PM

Back to the Global Macro Grind… 

“I'll be honest… fellas, it was sounding great. But… I could've used a little more cowbell. So… let's take it again.”1,2,3: 

  1. Dollar Down
  2. Rates Down
  3. Stocks, Bonds, Gold Up 

Oh yeah, feel the market Jerome! 

And I have to admit that, even though he figured out our Quad 4 in Q4 call on a 4 month delay, Jerome Powell actually did what our GIP model proactively predicted he should, going dovish in a hurry post that Dovish December Hike

While perma stock market bulls will be as happy as this current Gold and REITS (VNQ) bull is in his P.A. (personal account), the problem, from here, is that: 

  1. If the economic and earnings cycles continue to slow, you’re going to have to keep buying stocks on bad news … or
  2. If what the Fed did magically creates a new economic #acceleration, poor Powell is going to have to go back to hawkish! 

Do you believe in the Gold breakout signal here, or do you believe in magic? 

  1. US GDP – don’t forget that we’re comparing against a US record 9 straight quarters of y/y GDP #acceleration
  2. Both China and Europe continue to #slow this morning (and their stock markets didn’t react to More Cowbell)
  3. Earnings Cycle comparisons only get tougher for the next 3 quarters 

On Earnings… 

  1. 36% of the SP500 (181 companies) have reported aggregate year-over-year EPS growth of +12.7%
  2. That’s down from +16-18% after the 1st 10% reported
  3. That’s down, big time, from #PeakCycle SPX EPS growth of +24-25% EPS growth in Q2 and Q3 of 2018 

But Facebook (FB) and Apple (AAPL) had great quarters, eh? Did they? Or did they simply not continue to implode from their respective peak growth rates looking back at 2018? 

If Q417 was the peak compare (peak comparison in terms of y/y earnings growth) and that’s what some beaten down expectations are “beating” here in the Q418 Earnings Season (MSFT and NVDA, not), I’d be more willing to believe more “beats” were on the come… 

But that’s not the case… so I highly suggest the new leader of the Trump stock market band really explores his inner cowbell. From these epic lower-highs in the NASDAQ and Russell 2000 (which are still down -12% and -15% from peak), he’s gonna need it! 

Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND views in brackets) are now:

UST 2yr Yield 2.47-2.62% (bearish)
SPX 2 (bearish)
RUT 1 (bearish)
NASDAQ 6 (bearish)
REITS (VNQ) 78.20-82.96 (bullish)
Shanghai Comp 2 (bearish)
VIX 16.50-21.71 (bullish)
USD 94.80-96.30 (bullish)
USD/YEN 108.00-109.85 (bearish)
Gold 1 (bullish)
AAPL 150.50-166.71 (bearish)
FB 145-170 (neutral) 

Best of luck out there today,


Keith R. McCullough
Chief Executive Officer

More Fed Cowbell! - Chart of the Day