“The best way to teach is the way that is most understood.”
- Matthew McConaughey
Looking for what a middle-aged Irishman calls “outlaw logic” for both your investing and personal life?
In McConaughey’s Greenlights, that’s just it. Love that.
While Hedgeye’s Full Investing Cycle #process gets easier to both teach and understand with time and space, the time that it’s easiest to understand is when we are right.
Maybe it “shouldn’t” be that way, but it is. Personally, I learn a lot more about the entirety of my risk management #process when I’m making some big mistakes. As the American Irishman from Texas reminded me:
“The earth needs gravity – without it there is no form.”
Back to the Global Macro Grind…
We’re only 2 weeks into 2021, but the gravity of The Cycle (i.e. the score of The Game) is becoming obvious to mostly everyone other than the Fed, some linear Econs, and a community of tweeters that do the fear-mongering-narrative thing.
What’s the YTD score?
A) SMALL CAPS (IWM) and Energy Stocks (XLE) up +9.2% and +17.4%, respectively, to new Cycle Highs
B) Commodities +5.3% vs. SPY +1.1%
Now I generally don’t do the “year-to-date” thing unless I am winning for the YTD, ha! But in all sincere and triggering obviousness this morning, all the YTD is doing is amplifying what’s been happening in Full Cycle Return terms since early November.
But, but, but… a guy named Sven is tweeting this and the government is doing that…
Yes. Kind of like the fans in the stands at the Rangers game in New York last night (i.e. there were none… and if they were chirping or tweeting at the score from home, they were irrelevant in the Rangers 0-4 loss to the Islanders anyway).
Back to what portfolios are actually doing (vs. what they could or should be doing per someone’s narrative), here are my Top 3 Things that I publish to premium subscribers every morning:
Correction day? In what? What do you do on correction days?
- RUSSELL (bullish) – there was no correction in the Russell 2000 (IWM) yesterday as the Core Long SMALL CAP Factor Exposure ramped to a new closing Cycle High of +9.2% already for 2021 YTD (vs. SPY +1.1%); lots of small cap ideas working from our Research team
- COMMODITIES (bullish) – there was no correction in this major Asset Allocation yesterday either with the CRB Commodities Index closing at a new Cycle High of 176 (that’s +5.3% YTD vs. SPY +1.1%, hence why were long Energy Stocks (XLE) instead which were +3% yesterday)
- LONGS – what are 10 Global #Quad2 exposures that you can buy-more of that were actually down yesterday (and/or overnight) that could be down on the US equity market open: EWJ, EWY, INDA, EWT, EWG, EPOL, EWL, BNO, FXC, XLK
Immediate-term @Hedgeye Risk Ranges: SP500 = 3; UST 10yr Yield = 1.00-1.24%
In other words, the things that Full Cycle Investors could have been long (since November in IWM’s case, or since June in the case of Commodities) continue to signal a series of higher-lows and higher Cycle Highs…
And the things that are not in those 10 LONGS (like US Dollars, Treasuries, Gold, Utilities, REITS, etc.) continue to make a series of lower-highs after registering Peak Cycle #Quad3 and #Quad4 returns all the way back in 2020!
If you still have the wrong kind of Rate Sensitivity to #Quad2 INFLATION #Accelerating, no worries. PE Powell proclaimed his mystery of faith yesterday that the Fed won’t be raising interest rates any time soon.
So… the bond market will continue to raise rates for him.
To the gravity of The Cycle and Quad2 #Greenlights,
KM
Immediate-term @Hedgeye Risk Range with TREND signal in brackets:
UST 10yr Yield 1.00-1.24% (bullish)
UST 2yr Yield 0.12-0.17% (bullish)
SPX 3 (bullish)
RUT 2075-2205 (bullish)
NASDAQ 12,759-13,343 (bullish)
Tech (XLK) 126.63-131.60 (bullish)
Energy (XLE) 39.78-45.53 (bullish)
Financials (XLF) 29.42-32.43 (bullish)
Utilities (XLU) 60.66-63.07 (bearish)
Shanghai Comp 3 (bullish)
Nikkei 276 (bullish)
DAX 131 (bullish)
VIX 20.32-27.09 (bearish)
USD 89.19-90.64 (bearish)
Oil (WTI) 49.12-55.16 (bullish)
Gold 1 (bearish)
Copper 3.54-3.73 (bullish)
Bitcoin 33,251-40,617 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
