“We’d like to see more.”
-Jay Powell
I’m pretty sure he meant that he’d like to see where SPY and High Yield Spreads trade, but the journos in the room took that as A) more economic data #slowing and B) what happens at Trump’s dinner with the Chinese on June 29th…
With Treasury Yields crashing, Gold ripping to new Full Cycle Investing highs (10-months ago The Cycle peaked), and SPY’s at all-time highs, what the market would like to hear and see more of is centrally-planned #cowbell!
In terms of US Equities, since everything I’m long (Utes and REITS) is making new all-time highs this morning, I guess I should thank PE Powell for the PA impact! You’re getting Wall Street 2.0 paid, brother!
Back to the Global Macro Grind…
Forget working for Trump and Private Equity (must not let credit spreads widen if he wants to be worth $150M bucks post the Fed gig working for my old boss again @Carlyle), now PE Powell works for all of us too.
As he “sees more” SPY all-time highs… and if he sees a Trump/Xi deal, are the 100% odds of a Fed cut in July the right odds to expect? Again, bro, everyone at the Chevy Chase Country Club and I want and need this. Do it!
Oh yeah, on the #EarningsRecession odds rising thing (without them, how could my new PA Brother get to the rate cut party?), no worries, eh? The New Hope is that at the all-time highs, earnings cycles don’t matter anymore.
This, of course, was the hope at both the end of SEP 2018 and APR 2019, but let’s just forget about that for today.
As a matter of #process, what I’m going to do this morning is what I always do:
A) Kiss my wife before I go to work… and
B) Make sales at the top-end of my @Hedgeye Risk Ranges
If Brother Powell is going to ring the cash register in our 401k, RIA, and kids accounts, why not skim a little and book some gains so that we can buy-moarrr-cowbell on a summer-time morning selloff that happens when the least amount of people are positioned for it?
In terms of the shorts (not in my kids accounts), we’ll see what happens at lower-highs for Cyclicals and the Financials with people chasing charts this a.m. but yesterday pretty much sucked for them, on both a relative and absolute basis:
- Materials (XLB) were down -0.6%
- Financials (XLF) were down -0.2%
- Energy (XLE) was down -0.1%
- Industrials were down -0.1%
You get it, right? If you’ve been SHORT a basket of all 4 of those US Equity Sector Styles (or just short the Russell 2000) from where The Cycle peaked in Q3 of 2018 to even this morning vs. LONG:
- Treasuries (across the curve, fully loaded with Zeroes too)
- Gold
- REITS (VNQ)
- Utilities (XLU)
Then your long/short portfolio keeps making new highs as The Cycle continues to slow too.
Yep, more and more people, PMs, etc. are starting to dig my Full Cycle Investing thing. Thank God, not everyone gets NOT losing money when everyone else does, shorting macro exposures because they’re “expensive”, etc.
Per yesterday’s Bloomberg article on former Masters of The Universe who don’t do The Cycle, “of the 468 U.S. hedge funds that have used Goldman’s prime brokerage services since 2009, almost half are out of business.”
God willing (yep, gotta thank him too, Brother PE), we have as many PMs as possible panicking and chasing this morning right into Chinese Dinner, Fed Cut, and Earnings Season catalysts…
Not that many in Old Wall Media will mention this today, but Taiwanese Exports just melted-down to -5.8% year-over-year in MAY vs. an already horrendous -3.7% in APR. In Taiwan, “stocks” were only +0.1% last night.
Evidently they need more cowbell, a Dovish Enough bro like Powell, and CNBC chasing Beyond Bubbly (BYND) to get with the program of hyping and hoping up “stocks” at the all-time highs like we saw back in both 2000 and 2007.
Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND signals in brackets) are now:
UST 10yr Yield 1.98-2.16% (bearish)
UST 2yr Yield 1.69-1.93% (bearish)
SPX 2 (bullish)
RUT 1 (bearish)
Utilities (XLU) 59.25-61.41 (bullish)
REITS (VNQ) 88.45-91.62 (bullish)
Financials (XLF) 26.50-27.59 (bearish)
Shanghai Comp 2 (bearish)
Nikkei 202 (bearish)
DAX 119 (bullish)
VIX 14.03-18.69 (neutral)
USD/YEN 107.60-109.04 (bearish)
USD/CHF 0.98-1.00 (bearish)
Oil (WTI) 50.88-54.83 (bearish)
Nat Gas 2.22-2.40 (bearish)
Gold 1 (bullish)
Bitcoin 7 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
