Below is a chart and brief excerpt from today's Early Look written by Hedgeye CEO Keith McCullough.
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If you have friends who chased the “charts” when gross long hedge fund exposure peaked, they paid the fundamental price. All 3 Factor Exposures (Leverage, High Beta, Small Cap) were down big vs. beta (SPY) which was -11.5% on the week itself. So what do you do? When the Fed says go, do you buy buy buy? Or should you already have bought the non-Equity & speculatively pro-cyclical Credit asset allocations that are ripping (Treasuries in particular) pre-cut? Pre-virus, all of the fundamental GROWTH (peaked in Q3 of 2018), INFLATION (peaked at +2.3% y/y in JAN), and EARNINGS #slowing data was plainly obvious in the ROC (rate of change) math. Post-virus Fed Cuts would only get me to gross up #Quad4 Equity Longs like LOW BETA, LARGE CAP QUALITY, and SAFE YIELD, if PE Powell can convince markets that US Equity Volatility can hold below 31. |
