“So you’re telling me there’s a chance.”
-Lloyd Christmas
If you haven’t seen Jim Carrey in Dumb and Dumber, no worries… turn on Larry Kudlow or whoever has tried to have you chase CNBC FOMO Futures on a “trade deal” for the last 3-6 months.
The more important part of the show has, of course, been The Cycle.
While it can be frustrating going from meeting to meeting with Institutional clients while markets are getting whipped around by tweets and headlines, our business opportunity has been in teaching people how to fade the FOMO.
Back to the Global Macro Grind…
After meeting with Institutional Investors in Dallas, Texas yesterday, I’m on my way to Austin, TX right now so I’ll keep my Late Look brief.
Here’s are the Top 3 Things (published daily to Institutional Research Subscribers by 6AM EST) in my notebook this AM:
- ASIA – America’s fascination with FOMO “trade deal” headlines isn’t how Asian Equity markets, Copper, etc. trade – the Hang Seng’s #crash continued overnight (-0.8% on the day and -22.5% since Q1 of 2018), Taiwanese stocks dropped another -1.2% after another #recessionary Export report of -4.6% y/y for SEP
- VIX – front-month closes back above 20 at 20.28 as whoever chased CNBC FOMO Futures 1-month ago today is checking their risk management process (1-month ago today implied volatility on SPY was priced at an ultra-complacent -45% DISCOUNT to 30-day realized – today that’s a +46% PREMIUM!)
- RUSSELL – but you gotta “buy stocks”, ex a broad basket of stocks in the Russell 2000 which are testing their #Quad4 in Q3 AUG lows at -15.4% from the #FullCycleInvesting peak of Q318; we remain bearish of SMALL CAP, HIGH BETA, and LEVERAGE factor exposures
Talk about being dumb about The Cycle and getting dumber, eh? Who in their right mind was chasing FOMO US Equity Futures 1-month ago today ahead of both #Quad4 in Q3 economic data and Q3 Earnings Season?
Yesterday, one client actually thought the start to Q3 #EarningsSlowing Season was a typo at -19% year-over-year aggregate EPS growth for the SP500 Q3-to-date. It wasn’t. Only 18 of the SP500’s companies have reported so it is skewed.
Can you imagine year-over-year SP500 earnings being down -15-20% year-over-year?
If you’ve been in this business as long as I have, your imagination doesn’t have to be all that creative. Post #PeakCycle year-over-year SP500 Earnings Growth of +23% in Q3 of 2000, within a year, that’s were earnings #slowed to.
I know, I know. It’s always different this time.
But how does one explain to one’s clients that they “bought stocks” on a trade deal tweet ahead of and into a proactively predictable #EarningsRecession that is broadening into beloved Sectors like Technology and Consumer?
Obviously just “buying stocks” is sounding dumb and dumber by the day of human evolution too…
In the modern era of #FullCycleInvesting, it’s obviously not about buying the Dow Bro (which, by the way, has a NEGATIVE year-over-year return from this day in 2018). It’s about getting:
A) The Data-Driven Economic Quads right… and
B) Your Asset Allocations, Sector Styles, and Factor Exposures right
But you’re saying there’s a chance of an “interim deal”? Cool. I have Jim Carrey style Canadian “ear muffs” (na, na, na) on that too. I’m just going to stay with my risk management #process.
Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND signals in brackets) are now:
UST 10yr Yield 1.46-1.65% (bearish)
UST 2yr Yield 1.30-1.57% (bearish)
SPX 2 (bearish)
RUT 1 (bearish)
NASDAQ 7 (bearish)
Utilities (XLU) 63.37-65.29 (bullish)
REITS (VNQ) 91.80-93.95 (bullish)
Energy (XLE) 55.01-59.86 (neutral)
Shanghai Comp 2 (bearish)
Nikkei 21132-21903 (bearish)
DAX 118 (bearish)
VIX 15.00-22.20 (bullish)
USD 98.05-99.30 (bullish)
EUR/USD 1.08-1.10 (bearish)
USD/YEN 106.50-108.33 (neutral)
GBP/USD 1.22-1.24 (bearish)
USD/CHF 0.98-1.00 (neutral)
Oil (WTI) 50.78-56.53 (bearish)
Nat Gas 2.21-2.41 (bearish)
Gold 1 (bullish)
Copper 2.52-2.61 (bearish)
Best of luck out there today,
KM
