“If you decide you want to be an accountable leader, then you must fully commit.”
- Dr. Vince Molinaro
I could have started with a TB12 quote this morning… but, as our head of Hedgeye Media, Dan Holland, often reminds me “your actions speak so loudly, I cannot hear what you are saying.”
I think Ralph Waldo Emerson said that first. But, when it comes to leadership in this day and age, does it really matter? Big time. As Molinaro goes on to explain in his Introduction to Accountable Leaders, “research estimates that only 15% of companies have the culture they need to succeed.”
Leadership, culture, #process – it all matters. “Leadership is a decision. You must be clear on the expectations of the role and be ready to set the tone for others. You must be all in.” That, you and your teammates were, Tom Brady. #WellDone.
Back to the Global Macro Grind…
Welcome to another Macro Monday @Hedgeye! Super Bowl hangover or not, we’re grinding alongside you this morning. For 13 years running, we’re up at the top of the risk management morning, putting in the measuring and mapping reps.
Let’s start with the Global Currency market which, on a TRENDING duration, still sees Global #Quad2:
- USD Index had a Counter @Hedgeye TREND bounce of +0.5% last week to -1.6% in the last 3 months
- EUR/USD corrected -0.7% last week to +1.9% in the last 3 months and remains Bullish @Hedgeye TREND
- Japanese Yen was down another -0.6% vs. USD last week and remains Neutral TREND @Hedgeye
- GBP/USD was up another +0.2% last week to +4.5% in the last 3 months and remains Bullish TREND
- Russian Ruble appreciated +1.7% last week vs. USD to +2.9%% in the last 3 months and remains Bullish TREND
- Canadian Dollar was +0.1% vs. USD last week to +2.2% in the last 3 months and remains Bullish TREND too
Full Cycle Investors define @Hedgeye TRENDs as 3 months or more. There are plenty of immediate-term TRADE head-fakes along the way. That’s why we use a multi-factor, multi-duration risk management #process.
The most obvious and investable @Hedgeye TREND since June of 2020 has been being Long INFLATION #accelerating. Here’s how those direct inflation payments flowed into your accounts again last week:
- CRB Commodities Index inflated another +4.1% last week to +21.6% in the last 3 months
- Oil (WTI) inflated another +8.9% last week to a new Cycle High = +42.6% in the last 3 months
- Corn inflated another +0.4% last week to a +32.2% in the last 3 months
- Lean Hogs inflated +4.8% last week to +13.9% in the last 3 months
- Lumber inflated another +3.2% last week to +72.7% in the last 3 months
If you have Old Wall Media friends who really need someone in the US government to tell them there’s not an epic inflation #acceleration, then let them. In the meantime, the rest of us will remain long of it in both Commodity and Equity terms:
A) Energy Stocks (XLE) inflated another +8.2% last week to a league leading +43.9% in the last 3 months
B) SMALL CAPS (Russell 2000) inflated another +7.7% last week to a new all-time high = +34.5% in 3 months
Yep, Full Cycle Investors are long ENERGY + SMALL CAPS. In Fixed Income Asset Allocation terms, they’re Long HIGH YIELD, Steepeners (IVOL)… and they are Short Deflation via Duration (TLT) – that long/short setup continued to crush it last week:
A) High Yield OAS Spreads tanked another -29 basis points last week to -103bps in the last 3 months
B) UST 10yr Yield ramped another +10 basis points to a new Cycle High = +40bps in the last 3 months
C) Yield Curve steepened another +11bps on 10s/2s, steepening +44bps in the last 3 months
I know – what a difference a week makes. From a Factor Exposure perspective in US Equities it was a big #Quad2 week too:
A) HIGH BETA stocks were up another +8.0% to +35.2% in the last 3 months
B) SALES GROWTH (top 25%) stocks were +7.3% to +27.1% in the last 3 months
C) EPS GROWTH (top 25%) stocks were +6.5% to +26.0% in the last 3 months
*mean performance of Top Quartile vs. Bottom Quartile, SP500 Companies
The alternative to being long all of these #Quad2 Asset Allocations, Sector Styles, and Factor Exposures would be long fear, and a headline chasing process that might have you long something like Gold (-1.8% last week and -7% in the last 3 months).
Being a Full Cycle Investor is a data-driven decision. You must be all-in to realize Full Cycle results.
Immediate-term @Hedgeye Risk Range with TREND signal in brackets:
UST 10yr Yield 1.07-1.21% (bullish)
SPX 3 (bullish)
RUT 2133-2247 (bullish)
NASDAQ 13,260-13,996 (bullish)
Energy (XLE) 38.69-43.95 (bullish)
VIX 17.43-27.31 (bearish)
USD 89.96-91.45 (bearish)
EUR/USD 1.196-1.221 (bullish)
USD/YEN 103.51-105.93 (neutral)
GBP/USD 1.361-1.377 (bullish)
CAD/USD 0.77-0.79 (bullish)
Oil (WTI) 52.36-57.91 (bullish)
Gold 1 (bearish)
Best of luck out there this week,
KM
Keith R. McCullough
Chief Executive Officer
