“Adopt a mindset that embraces change.”
- Jeff Tyburski
That’s a great quote from a retired client who just wrote a parental guide-book to financial literacy called Your Sherpa. As a parent/coach to an awesome group of kids at the Quebec PeeWee tournament this past week, I’m reminded that teaching life principles matters a lot more than counting a kid’s points.
It’s going to be a great Friday morning for Treasuries, Gold, REITS, Utes, etc. bulls, eh bud?
Back to the Global Macro Grind…
In Canadian hockey circles, calling someone your “buds” is big. It’s a unique term of endearment and friendship. It means the opposite of many foul names you might hear players called on the ice by the other team.
Enough about hockey. How about reinvesting your economic Quad gains? Do you have a market timing process for that?
“Market-timing” (to people who don’t have a Quad & Signal process for that) are two of the foulest words that can be heard by the marketing department of a buy-and-hold product for one-small-slice of what should be a fully allocated and diversified Global Macro portfolio.
If you have a go-anywhere-anytime strategy, you’re thinking “oh yeah, love that, eh bud!”
Go anywhere? Anytime? Yep. If you have a bias towards a certain strategy, you might consider the sound of that “short-term.” If you’re a Full Cycle Investor however, it’s the furthest thing from it.
As you can see in today’s Chart of The Day, here are the absolute returns for Treasuries, Gold, REITS, and Utes (XLU), from where you’d have booked your gains in #Quad2 Longs like Industrials (XLI) and Small Caps (IWM), and reinvested them in those core #Quad4 assets, at the end of Q3 of 2018.
You’d be similarly happy, eh, bud? If you bought those Cyclicals and Small Caps in Q3 of 2016 and held them for 2 years ending Q3 of 2018…
Q: so now, the only major question that really matters for Hedgeye Full Cycle Investors is when do we get out of our longer-term #Quad3 and #Quad4 asset allocations, short-them, and get long our cyclical and small cap shorts?
A: not today, bud.
Why?
- The UST 10yr Yield is collapsing towards levels not seen since the US economy last landed in #Quad4 (Q3 of 2019)
- The Yield Curve continues to re-invert with the 5yr UST Yield of 1.34% trading lower than the UST 2yr Yield of 1.37%
- The US Dollar Index continues re-ramp to its #Quad4 in Q3 of 2019 highs
- Commodities, including Oil and Energy Stocks, continue to deflate, in kind
- Emerging Market Equities continue to deflate alongside that #StrongDollar
Oh I know. Some of your friends got long those cyclicals (and shorted and/or went underweight Treasuries & Gold) back in November of 2019 when it was the greatest #BeanDeal in the history of deals that was going to mark the bottom in everything most of them never called the top in back in Q318…
Totally cool with me, eh. With coronavirus though (and non-V-bottoming PMIs and ISMs), they just need a new narrative, bud.
Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND signals in brackets) are now:
UST 10yr Yield 1.45-1.62% (bearish)
UST 2yr Yield 1.31-1.45% (bearish)
SPX 3 (bullish)
RUT 1 (bearish)
Utilities (XLU) 68.38-71.62 (bullish)
REITS (VNQ) 96.00-100.94 (bullish)
Consumer Staples (XLP) 63.98-65.23 (bullish)
Nikkei 23112-23709 (bearish)
DAX 135 (bullish)
VIX 13.23-17.01 (bullish)
USD 98.30-99.98 (bullish)
EUR/USD 1.07-1.09 (bearish)
Oil (WTI) 48.63-54.31 (bearish)
Nat Gas 1.71-2.02 (bearish)
Gold 1 (bullish)
Copper 2.53-2.63 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
