“Stock markets hit another ALL TIME & HISTORIC HIGH yesterday! You are sooo lucky to have me as your President (just kidding!). Spend your money well!”
-Donald J. Trump
Wow, that’s not going to age well.
Back to the Global Macro Grind…
For many different reasons, I do feel blessed (and lucky) this morning. It was on this early morning in 2007 that my son Jack was born in New York City. I remember holding him for the first time, looking out the window at The City, deciding I was never going back.
12 years later, I thank my good God that I never went back to the Old Wall. Hedgeye’s disruptor vision is aging well.
In a much better tweet from another DJ (my long-time friend and business Partner, Daryl Jones who is our Director of Research and Head of Hedgeye Institutional Sales) last night @HedgeyeDJ:
“We’ve been attacked by the financial media. We’ve been attacked by anonymous bloggers/tweeters; we’ve been attacked by Zeroh(E)edge, we’ve been attacked by billionaires. But @Hedgeye is on the verge of a record quarter and the research revolution will only continue.”
Amen, Brother Jonesy.
And so it begins all over again. Another day, another set of economic data points, and another round of market data. We are so lucky to have you as our loyal clients and subscribers. Without you believing in a better way, we couldn’t have built this.
My sincerest Thank You.
Now back to the FOMO Futures… and potentially fake… but who cares if it’s fake… because we’ll get more “trade deal news” that’s spun and tweeted as super bullishly positive no matter what the economic truths are in the meantime…
The Hedgeye Nowcast for US GDP Growth in Q4 of 2019 is 0.58% QoQ SAAR. Per the DD who works alongside the DJ:
Quad 3 in Q4 Appears Most Likely After the First Batch of Domestic Economic Data:
A) My favorite sleep deprivation activity of late has been trying to gain analytical edge on whether the US economy has inflected into Quad 2 here in 4Q19E, or if the trending deceleration off the 3Q18 cycle-peak remains ongoing.
B) Thus far, we’ve received data for 9 of the 30 factors in our dynamically re-weighting predictive tracking algorithm for US Real GDP growth, representing approximately 30% of the cumulative interpolation signal. On balance, these data paint a picture of incremental softness:
i. Improving on a Quarterly Average Basis: Aggregate Hours Worked YoY, Initial Jobless Claims YoY (bad = good), ISM Non-Manufacturing PMI
ii. Deteriorating on a Quarterly Average Basis: Auto Sales YoY, Nonfarm Payrolls YoY, Average Hourly Earnings YoY, Aggregate Wage & Salary Income YoY, Consumer Confidence YoY, ISM Manufacturing PMI
Notwithstanding that the “deal” has now been “delayed to December”…
What could possibly go wrong from the Trumped up all-time high in SPY? You might be able to believe whatever you want (or need) to believe about the US economic truth until GDP is reported in January!
In terms of the latest Global Economic Data, here’s Darius Dale’s (i.e. DD) Top 3 Callouts from this morning:
- Russia’s OCT Headline CPI data was incrementally confirming of our #Quad1 Nowcast for the Russian economy here in 4Q19E. 3.8% YoY represents the slowest RoC in a year.
- Not all Quad 1s and 2s are the same. Take Argentina’s #Quad1 nowcast for 3Q19E, which was incrementally confirmed by the SEP Industrial Production data, which accelerated to DOWN -5.1% YoY. The ARGT ETF still looks like an economy mired in recession that has a tremendous amount of political risk. Remove even one of those bearish overhangs amid a declining USD and it could be off to the races, but it’s too early to make that call today.
- German Industrial Production slowed to DOWN -4.3% YoY in SEP, a three-month low. As I’ve written about extensively, however, the market may continue to look through the lagging hard data, as it already knows such figures have to catch down to the leading soft data. Unlike the USA and China (#Quad3), we have the German economy in #Quad2 for the next 2 quarters.
Interestingly, but not surprisingly (as Hedgeye subscribers know that both the German and Russian stock markets continue to signal Bullish @Hedgeye TREND):
A) Germany’s DAX is up another +0.8% this morning taking its 1-month gain to +10.1%
B) Russia’s Trading System Index (RTSI) is up another +0.7% this morning taking its 1-month gain to +12.2%
While I can’t find the tweet from Putin that says Russians are sooo lucky to have him as President, I’m sure he’s feeling pretty good about the Russian economy being in #Quad1.
Germany’s #Quad2 is a shallow one, so don’t chase “stocks” here. I don’t chase but I will buy them (and Spanish Equities, EWP) at the low-end of their respective @Hedgeye Risk Ranges.
At 20x the wrong EPS number for SPY, everyone knows Russian and German stocks are cheaper on more believable numbers too.
As for what I’m willing to believe this morning: I believe in my family, firm, and my risk management #process. Happy Birthday, Jack! We are so lucky to have you in our lives.
Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND signals in brackets) are now:
UST 10yr Yield 1.68-1.90% (bearish)
SPX 3010-3093 (bullish)
RUT 1 (bearish)
NASDAQ 8 (bullish)
REITS (VNQ) 91.60-95.45 (bullish)
Energy (XLE) 57.30-61.84 (bullish)
Shanghai Comp 2 (bearish)
DAX 127 (bullish)
VIX 12.11-15.61 (bearish)
USD 96.95-97.99 (neutral)
Oil (WTI) 54.31-57.79 (bullish)
Nat Gas 2.36-2.96 (bullish)
Gold 1 (bullish)
Copper 2.63-2.72 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
