“Truth bombs that interrupted my space and time in ways I could not ignore.”
-Matthew McConaughey
As many of you who watch either The Call or The Macro Show know, the middle-aged Irishman from Texas recently inspired me with his life-book, Greenlights.
“Sometimes you gotta go back to go forward. And it don’t mean going back to reminisce or chase ghosts. I mean go back to see where you came from, where you been, how you got here.”
McConaughey wasn’t talking about The Cycle, but he could have been. The truth about The Cycle, is that it cycles. Our #process for “calling” growth, inflation, rates, etc. can’t look forward without looking back at the base effects.
Back to the Global Macro Grind…
Welcome to Macro Monday @Hedgeye where we measure and map the weekly market message on where The Cycle is. Last week’s Global Macro market moves clearly reiterated that it is Global #Quad2.
As a matter of process, we always consider the multi-duration message from the Global Currency market:
- US Dollar Index remained in #Quad2 crash mode +0.2% on the week and down -3.7% in the last 3 months
- EUR/USD was flat 0.0% last week and is up +0.9% in the last month = Bullish TRADE and TREND @Hedgeye
- Canadian Dollar was +0.3% vs. USD last week to +1.6% and +4.9% in the last 1 and 3 months, respectively
- CNY/USD was up another +0.8% last week to +0.9% and 4.9% in the last 1 and 3 months, respectively
- Norwegian Krone was up another +18% last week to +4.0% and +9.9% in the last 1 and 3 months, respectively
Who cares about the Norwegian Krone, Bitcoin, or Tesla? People who are long or short of them do. The purchasing power of the Norwegians is ripping right now. If you get paid in Krone, you like it too.
Bitcoin and Tesla (TSLA) love #Quad2 too, btw:
A) Bitcoin was +37% last week and is up +113% and +267% (not a typo) in the last 1 and 3 months, respectively
B) TSLA was +25% last week and is up +35% and +107% (not a typo) in the last 1 and 3 months, respectively
Think about that vs. what “should” have or “could” have happened in the last week or month, never mind when Global #Quad2 started getting most obviously priced-into macro markets back in late OCT to early NOV…
= #TruthBombs that those with other market narratives cannot ignore.
How about Gold? Shouldn’t it “go up” when the US Dollar is being devalued and political anarchy finds its way to both the Capitol building and CNN? Nope, not with Rates Ripping like they just did in #Quad2:
A) UST 10yr Yield ramped +20 basis points higher last week taking its 3-month gain to +33 basis points
B) Gold was down -2.6% last week and is down -1.2% and -2.4% in the last 1 and 3 months, respectively
For a while people with belief-systems about Gold didn’t think that “could” or “should” happen if real rates are negative. Not true, obviously. Real rates going less negative and the Yield Curve steepening +35 basis points in the last 3 months was plenty enough to make both Gold and Gold Miners (GDX) fantastic relative shorts to everything we’re long in #Quad2.
#Quad2 has been great for the cyclical (and “value”) US Equity Sector Styles we added to the long side:
A) Energy Stocks (XLE) were up another +9.3% last week to +32.4% in the last 3 months
B) Financials (XLF) were up another +4.9% last week to +22.7% in the last 3 months
We’re, of course, not long them because they are “value” … we’re long them because they are #Quad2 longs inasmuch as we are short Deflation/Duration Rate Sensitivity via:
A) Utilities (XLU) down another -0.6% last week to -1.8% in the last 3 months
B) REITS (XLRE) down another -2.5% last week to -3.7% in the last 3 months
I know. Utes look just like Gold… yet I get ZERO pushback on the Short XLU call vs. Gold is an absolute hornet’s nest for me on Twitter! Haha
What else reiterated Global #Quad2 last week? Our International and Emerging market Equity Longs:
A) EM (MSCI Index) was up another +4.8% last week to +21.1% in the last 3 months
B) KOSPI (South Korea) was up another +10.4% last week to +36.9% in the last 3 months
No, up +36.9% in the last 3-months vs. Gold -2.4% isn’t a typo. It’s Global #Quad2. Commodities had another #Quad2 week as well:
A) CRB Commodities Index was +3.3% last week to a new Cycle High (+42% from where we went bullish in JUN)
B) Soybeans inflated another +4.9% last week to +19.4% and +34.4% in the last 1 and 3 months respectively
But don’t worry, the Feds say there’s no inflation, bahaha!
“Alright, alright, alright.” -Irish Guy
Immediate-term @Hedgeye Risk Range with TREND signal in brackets:
UST 10yr Yield 0.98-1.13% (bullish)
SPX 3 (bullish)
RUT 2011-2120 (bullish)
NASDAQ 12,653-13,290 (bullish)
Tech (XLK) 126.70-131.98 (bullish)
Energy (XLE) 37.73-42.41 (bullish)
Financials (XLF) 28.87-31.37 (bullish)
Utilities (XLU) 60.36-62.99 (bearish)
Gold Miners (GDX) 34.45-39.55 (bearish)
VIX 20.01-26.99 (bearish)
USD 89.21-90.49 (bearish)
EUR/USD 1.216-1.235 (bullish)
CAD/USD 0.78-0.80 (bullish)
Oil (WTI) 47.56-52.53 (bullish)
Gold 1 (bearish)
Copper 3.52-3.73 (bullish)
TSLA 728-892 (bullish)
Bitcoin 30,230-40,041 (bullish)
Best of luck out there this week,
KM
Keith R. McCullough
Chief Executive Officer
