“I have awakened with them in the morning and thought about them when I went to bed at night.”
-Doris Kearns Goodwin
Doris wasn’t writing about Trump’s tweets. In what might be her masterpiece of US Presidential history, that’s what she wrote about “the lives and times” of four US Presidents in her presciently timed new book: Leadership In Turbulent Times.
“With public sentiment, nothing can fail,” Abraham Lincoln said, “without it nothing can succeed.” Such a leader is inseparably linked to the people. Such leadership is a mirror in which the people see their collective reflection.” (pg xvi)
I don’t know about you, but I wake up every morning having to deal with world leaders, central bankers, etc. trying to change public sentiment about markets. I don’t think about them when I go to bed at night. I have better things to do.
Back to the Global Macro Grind…
‘But Keith, why fight the Fed – why fight Trump’s tweets – why not just buy stocks’
… heard echoing in a nightmare about what’s happened to a lot of people and their money at every lower-high since I went bearish on the US stock market in September of 2018…
Why not just give up on the #process that called for the Fed pivot and just go with emotion or the latest monthly move?
I guess that would put my net wealth, firm, and credibility at risk. So let’s start and end with that. For those of you who manage your own accounts, that’s the thing about the net wealth thing…
- If you got out of US Growth exposures at The Cycle peak (SEP 2018), you didn’t have a draw-down
- If you reinvested into Treasuries, Gold, Housing, REITS, and Utilities your retirement portfolios just hit all-time highs
Yeah, I shorted SPY’s and lost money in JAN. But I don’t carry that position in my kids’ accounts, 401k, IRAs, etc.
In my trading account, I’m also adding to core short SPY, XLF, XLI and JNK positions against aforementioned longs (TLT, SHY, GLD, VNQ, ITB). What are you going to do, from here?
Essentially, when it comes to running your own money (and/or that of others), that’s the only question that matters this morning. What is your process and what moves are you going to make next?
While I can’t go back and get you the cost basis on making good sell decisions (in the Quad 4 exposures we didn’t like higher), I can call this the 5th Best Selling Opportunity since September.
I know. Some hedgies are under extreme-short-term-performance-pressure (ESTPP). I hear them and I empathize with them. Not an easy job but I also want to try to help them not chase the US stock market to lower-highs again at 16 VIX.
Remember the end of November 2018?
- Stocks bounced on Trump Tweets (something about dinners with Chinese guys)
- Front-month VIX had a 16 handle (it had one in early NOV too)
- It ended up being the worst December, ever
Yep, I know x2. January was the best since 1987. That might have had to do with:
- Late December signaling @Hedgeye immediate-term #oversold lows in US Equity Beta
- Powell going for Cowbell Part 1… then Cowbell Part 2…
- Many tremendous tweets about “huge and amazing progress” with China
But what about Microsoft (MSFT) and Amazon (AMZN)? Great American companies, last I checked. Both #GrowthSlowing from their respective cycle peaks can’t be centrally planned or tweeted away, can it? Can the Fed cut Wage Growth?
Amazon (AMZN) actually reported their slowest North American (read: not Chinese) Retail Sales growth rate since Q4 of 2014. Not ironically, that’s when (early 2015) we started signaling a ROC (rate of change) #slowing in the US economy too.
Putting that AMZN data point in perspective, NA Retail Sales #slowed to +21.2% year-over-year growth in the most recent quarter and that compares to the #PeakCycle growth rate of +28.1% back in … drumroll… Q3 of 2018!
For those of you who are new to having a quantified macro overlay to your stock picking:
- Q3 of 2018 was when year-over-year US GDP growth peaked
- Q3 of 2018 (July) was when year-over-year US headline INFLATION peaked
- Q3 of 2018 was when year-over-year US corporate PROFITS peaked
And… no worries, “great quarter guys”… you only have 3 more quarters left of slowing against those steepening base effects of the comparative year-over-year reporting period. Cowbell and tweeting might have to be bigger than huge from here.
Immediate-term @Hedgeye Risk Range with TREND signal in brackets:
UST 10yr Yield 2.61-2.75% (bearish)
UST 2yr Yield 2.42-2.58% (bearish)
SPX 2 (bearish)
RUT 1 (bearish)
NASDAQ 6 (bearish)
Utilities (XLU) 52.50-54.92 (bullish)
REITS (VNQ) 78.21-83.85 (bullish)
Industrials (XLI) 67.56-72.14 (bearish)
Housing (ITB) 31.90-34.65 (bullish)
VIX 16.09-21.93 (bullish)
Oil (WTI) 51.06-54.67 (bearish)
Gold 1 (bullish)
AMZN 1 (bearish)
Best of luck out there today,
Keith R. McCullough
Chief Executive Officer