“The decade long rally could continue for years…”
-Barron’s
For those of you who still read Old Wall Media material, you saw the aforementioned quote on the cover of Barron’s this weekend. The headliner was “Is The Bull Unstoppable?”
Unstoppable? Maybe. Maybe not. With the President of the United States asking for more #cowbell from an already Triple Dovish Fed on Friday… who knows how much higher Oil and the cost of American living can go?
Do you think that any of this will be a tax on the ROC (rate of change) of 2019 US Consumption?
Bridgewater’s Ray Dalio didn’t have to go on 60 Minutes last night to remind us all about what’s driving both cyclical and secular inequality in America.
As you can see in today’s Chart of The Day below (slide 64 in our Q2 Macro Themes deck), in sharp contrast to all of us benefiting from easy money (Long Oil, Energy stocks, and REITS, baby!), The People haven’t been paid for 2 decades.
Back to the Global Macro Grind…
It’s Macro Monday @Hedgeye! I’d like to welcome all of our new subscribers and thank those of you who have consumed our measuring and mapping #process for going on 11 years now.
As a matter of #process, on the 1st day of every week we review last week’s Global Macro market moves within the context of our multi-factor and multi-duration frameworks.
As always, I like to start with the Global Currency market:
- US Dollar Index was +0.1% last week to +1.3% YTD and remains NEUTRAL @Hedgeye TREND
- EUR/USD was flat at $1.12 last week to -2.2 YTD and remains Bearish TREND @Hedgeye
- Yen was down -0.8% vs. USD last week to -1.9% YTD and is also NEUTRAL TREND @Hedgeye
- British Pound was flat vs. USD last week to +2.2% YTD and remains Bullish TREND @Hedgeye
- Argentine Peso was down -1.3% vs. USD last week to -14.3% YTD and remains Bearish TREND @Hedgeye
- Turkish Lira was down -1.1% vs. USD last week to -6.0% YTD and remains Bearish TREND @Hedgeye
Anyone who has studied the history of currency devaluation knows how that ended for The People in Latin America for decades. Chief Erdogan has been learning that lesson in Turkey for the last few years. It doesn’t end well.
In the shorter-term though, more central market-planning #cowbell can be awesome for “stocks”:
- China’s stock market ramped another +5.0% last week to +30.2% YTD! = Bullish TREND @Hedgeye
- Germany’s DAX popped +4.2% last week to +11.4% YTD getting back to Bullish TREND @Hedgeye
- Mexico’s stock market ripped +4.0% last week to +9.0% YTD getting back to Bullish TREND @Hedgeye
You gotta guy or gal who is long the Dow, bro? That was only up +1.9% last week. That’s nothing compared to China and Oil which have reflated +30.2% and +35.6% (WTI) for 2019 YTD, respectively!
Not surprisingly, what smoked the Dow last week, was being long the US Equity Sector Styles that do well when Bond Yields are rising for the right reasons:
A) Financials (XLF) had a Counter @Hedgeye TREND bounce of +3.5% last week to +11.7% YTD
B) Materials (XLB) had a Counter @Hedgeye TREND bounce of +4.2% last week to +14.4% YTD
Our risk management #process says you SELL both Financials (XLF) and Materials (XLB) this morning in preparation for a continued @Hedgeye economic TREND of Quad 3 for the next 3 quarters..
Here’s what last week’s Counter @Hedgeye TREND bounce in Bond Yields looked like:
A) UST 2yr Yield +8 basis points to 2.34% remains Bearish TREND @Hedgeye
B) UST 10yr Yield +9 basis points to 2.50% remains Bearish TREND @Hedgeye
As a reminder, rates rose (on a @Hedgeye TREND basis) “for the right reasons” when the US economy was ripping in what we call Quad 2 (i.e. when both GROWTH and INFLATION are #accelerating at the same time).
What wasn’t a Counter @Hedgeye TREND bounce last week was what your Triple Dovish Fed is in career risk management mode to reflate (Commodities):
A) Gasoline (RBOB) was up another +4.6% last week to +31.0% YTD and remains Bullish TREND @Hedgeye
B) Lean Hogs were up another +11.8% last week to +21.5% YTD and remain Bullish TREND @Hedgeye
No gas in that car? No bacon with those eggs? #NoWorries.
If you own enough of this Quad 3 Reflation in your portfolio you can afford it! Shouldn’t we (the people with all the money) get down on our knees and beg for the Fed to continue with unstoppable #cowbell for years?
Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND signals in brackets) are now:
UST 10yr Yield 2.34-2.56% (bearish)
UST 2yr Yield 2.18-2.40% (bearish)
SPX 2 (bullish)
RUT 1 (bearish)
NASDAQ 7 (bullish)|
Energy (XLE) 65.05-67.59 (bullish)
Financials (XLF) 25.00-26.98 (bearish)
Shanghai Comp 3039-3291 (bullish)
DAX 110 (bullish)
USD 95.75-97.50 (neutral)
EUR/USD 1.11-1.13 (bearish)
USD/YEN 110.10-112.13 (neutral)
GBP/USD 1.30-1.33 (bullish)
Oil (WTI) 58.40-63.99 (bullish)
Best of luck out there this week,
KM
Keith R. McCullough
Chief Executive Officer
