ICYMI → Our Favorite ETF Ideas Right Now - z hedgeye 08.13.2019 global slowing cartoon

But we have some good news for you.

We went ahead and laid out our current market outlook below. (Our subscribers received similar research like this a while back. That's why they are so happy...) We also included a partial list of our top, market moving investing themes and how each theme impacts our favorite ETFs.

If you’ve been thinking about becoming a Hedgeye subscriber, we encourage you to visit our subscription page to learn more and get a great deal.


Before we get into our current market outlook, the process for selecting our favorite ETF ideas is as follows:

  1. Macro Research: Our macro analysts track global economic and financial market data to detect key inflection points.
  2. Quarterly Investment Outlook: Our team identifies the three most important market-moving trends each quarter. These form the investing foundation for all ideas selected in ETF Pro Plus.
  3. Asset Classes: We break down the asset classes we like (and don’t like) based on our fundamental research and quantitative models (i.e. our GIP Model & Risk Ranges).
  4. ETF Ideas: Finally, our Macro team selects the best expression of our quarterly investment outlook from a menu of over 200+ liquid ETFs we monitor across global asset classes.


Below are the three essential Macro Themes we believe will drive market returns in the coming months. Each theme forms the foundation of our current investment conclusions and will augment your own investing process. Our favorite ETF Pro Plus long and short ideas fit into each of these three themes. 

1. USA Quad 4, Then Quad 3

If we’ve learned anything in May and December, it’s that you don’t need a “recession” to lose a lot of money in stocks and credit. #Quad4 = risk off, period. Most fund managers aren’t positioned for a summertime swoon. We still think the right play was to have “sold in May and gone away”… with the intention of buying back #Quad3 exposures later in the year.

(#Quad4 is Growth and Inflation slowing)

We added Gold (GLD) to our list of long exposures on the Fed-induced pivot. Importantly, Gold also performs well in Quad 4 (our outlook for the third quarter) because what Gold loves is falling real interest rates.

We also suggested increasing exposure to bonds and bond proxies on the long side ahead of #Quad4 in Q4 (Growth and Inflation slowing) both domestically and globally. We continue to like long exposures such as 20+ Year Treasury Bonds (TLT).

ICYMI → Our Favorite ETF Ideas Right Now - z1 GIP

ICYMI → Our Favorite ETF Ideas Right Now - z2 Our Risk Management Overlay is Rules Based

2. #EarningsRecession

We think the precarious combination of peak U.S. economic growth, peak dollar and cycle-peak compares for SPX sales and EPS growth could result in an earnings recession. Our view is that investor consensus has been lulled to sleep by top-down catalysts and remains too high on the outlook for earnings over the next two quarters.

Our scenario analysis suggests that even a modest degradation of EBIT margins could translate into year end S&P 500 earnings declining by -5% to -10% in 2019. Wall Street certainly isn’t prepared for that. The Fed can print money, but it can’t print earnings.

We think investors should stay short small cap, broad-based equity markets like the Russell 2000 (IWM), which is an explicit short in Quad 4. Our #Quad4 outlook will not prove kind to small cap stocks.

ICYMI → Our Favorite ETF Ideas Right Now - z3 Earnings Worst Growth Rates of the Q2 Reporting Season

ICYMI → Our Favorite ETF Ideas Right Now - z4

3. #PeakUSD

With the US economy continuing to decelerate, the Fed behind the curve on easing, and the Rest of the World setting up for a near synchronous recovery in the back half of the year, the dollar’s days of dominion over the global currency market are numbered. We believe the USD is setting up for a big move lower in the second half of 2019 and beyond.

ICYMI → Our Favorite ETF Ideas Right Now - z5 Peak Dollar

ICYMI → Our Favorite ETF Ideas Right Now - z6