“We feel like we have good depth, so let’s get at ‘er.”
-Mike Babcock
For those of you who don’t know who Mike Babcock is, he’s the 55 year old Coach of the greatest NHL team to not win a Stanley Cup in my lifetime, the Toronto Maple Leafs. He also hails from up in my neck of the woods in Manitouwadge, Ontario!
For those of you Montreal Canadiens fans who want to tweet something nasty at me right now, go for it! I probably won’t have time to chirp you back. I’m in Toronto for Day 2 of Institutional client meetings. Yesterday was the official NHL Trade deadline.
This former owner and data-driven analyst thought the Leafs needed to trade for another defensemen and a starting goalie, but Coach Babcock disagreed with me on that. He’s the boss. So we’ll see how the Leafs and your favorite teams do in the playoffs.
Back to the Global Macro Grind…
As a French guy used to say on the bench when I played Canadian Junior Hockey for the Pembroke Lumber Kings, “pitter, patter, eh – let’s get at er’ eh”... its’ the bullish trumped up trade “deal” deadline for the US stock market too!
That’s right. That’s my opinion. Remember the wonderfully huge and awesome dinner Trump had with China’s Xi back in November? Remember stocks ramping to lower-highs into that… and then proceeding to crash from there?
Oh and then the Fed going dovish, twice, as High Yield Credit stopped trading … and the Russell 2000 and NASDAQ crashed -23.6% and -27.2% from their respective #PeakCycle (Q318) highs… remember that?
Oh that’s so yesterday’s news…
But, like the full NHL season, The Cycle #slowing isn’t over until it’s over. As crazy as some of you thought the #PeakCycle calls for US GROWTH, INFLATION, and PROFITS were back in Q3 of 2018, is as crazy does this morning.
Let’s knock those 3 kingpins in our ROC (rate of change) #process down, one by one, here at the bullish trade deadline:
- GROWTH: we’re at +1.60% for headline US GDP growth on Thursday, #slowing from +3.4% in Q3 of 2018
- INFLATION: we’re at +1.67% for headline US INFLATION (CPI) for Q1 19, #slowing from +2.9% in JUL of 2018
- PROFITS: we’re currently tracking at +11.6% y/y SPX EPS growth for Q418, #slowing from +24.5% at #PeakCycle
Consensus wants to believe that a China “trade deal” is going to solve for The Cycle #slowing call that consensus completely missed calling for to begin with…
No matter what my trade deadline view, the Leafs have their goalie locked in and @Hedgeye’s nowcast for headline US GDP in Q1 of 2019 is for further y/y #slowing which imputes a headline q/q SAAR GDP of +1.69% for Q1 of 2019.
With A) US GDP slowing B) #StrongDollar, and C) both US Labor Costs + Quad 3 reflated asset (commodity) prices #accelerating, the probability of US Earnings re-accelerating in Q1 of 2019 isn’t 0%, but it’s pretty close to it.
For those of you, God forbid, who are allowed to look out 3-9 months to the #PeakCycle base effects (year-over-year comparisons) for both US GDP and Corporate Profits, does this get you excited to buy High Beta Equities and High Yield Credit right here?
It’s the trade deadline, so everyone has to make a call. Coach Babcock made his. Let’s get at ‘er! #LeafsNation
Our immediate-term Global Macro Risk Ranges (with intermediate-term quantitative TREND views in brackets) are now:
UST 10yr Yield 2.61-2.71% (bearish)
UST 2yr Yield 2.45-2.54% (bearish)
SPX 2 (neutral)
RUT 1 (neutral)
NASDAQ 7 (bullish)
Utilities (XLU) 55.06-57.29 (bullish)
REITS (VNQ) 83.70-85.55 (bullish)
Industrials (XLI) 72.93-76.92 (neutral)
Housing (ITB) 34.00-36.33 (bullish)
Shanghai Comp 2 (neutral)
Nikkei 209 (bearish)
DAX 11052-11594 (bearish)
VIX 13.33-18.45 (neutral)
USD 95.96-97.11 (bullish)
EUR/USD 1.12-1.14 (bearish)
USD/YEN 109.81-111.12 (bearish)
GBP/USD 1.28-1.32 (bullish)
USD/CHF 0.99-1.01 (bullish)
Oil (WTI) 52.67-58.51 (bullish)
Nat Gas 2.52-2.91 (bearish)
Gold 1 (bullish)
Copper 2.71-3.00 (neutral)
AAPL 167.12-174.21 (bearish)
AMZN 1 (bearish)
FB 153-167 (bullish)
TSLA 280-309 (bearish)
Bitcoin 3 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
