“Economic forecasting requires close attention to many different narratives.”
- Robert Shiller
Remember the time someone told you to “sell stocks” at VIX 30-something because “rates going higher is bad for stocks”? Both the SP500 and Russell 2000 made new all-time highs with the US 10yr Yield hitting a new Cycle High last week.
While I agree with Shiller that we need to pay attention to many of the fictional Macro Tourist narratives in the Old Wall’s media channels, I don’t think we have to pay “close attention.”
Clickbait narratives are usually summarized in simple headlines. Behaviorally, they should be faded at particular points in Market-Time when market prices are at the top and bottom-ends of their respective Risk Ranges.
Back to the Global Macro Grind…
Welcome to another Macro Monday @Hedgeye! For those of you who are new to our Full Investing Cycle #process, on the 1st day of the week, my Early Look measures and maps last week’s Global Macro moves within the context of The Cycle.
As always, let’s start with the Global Currency market:
- US Dollar Index was down -0.3% last week and is currently signaling Bullish TRADE but Bearish TREND @Hedgeye
- EUR/USD was +0.3% last week and is currently signaling Bearish TRADE but Bullish TREND @Hedgeye
- Japanese Yen was down another -0.6% vs. USD and remains Bearish TRADE and TREND @Hedgeye
- GBP/USD was up another +0.6% last week (+5.3% in 3 months) and remains Bullish TRADE and TREND @Hedgeye
- Canadian Dollar was up another +1.5% vs. USD last week and also remains Bullish TRADE and TREND @Hedgeye
- Norwegian Krone was up another +1.5% vs. USD last week to +4.6% in 3-months = Bullish TRADE and TREND too
Q: What is it that the Canadians and Norwegians have that is super valuable during #InflationAccelerating in Global #Quad2? A: Not Janet Yellen’s inflation narrative!
No matter what officialdom’s linear narrative is on INFLATION, being long of it continues to get Full Cycle Investors who have been long of Commodities, Energy Stocks (XLE +41.4% YTD), etc. paid:
A) CRB Commodities Index inflated +0.2% last week to +4.6% and +20.2% in the last 1 and 3 months
B) Oil (WTI) corrected -0.7% last week to +10.5% and +39.7% in the last 1 and 3 months
C) Copper inflated another +1.6% last week to +9.3% and +17.1% in the last 1 and 3 months
Those are some ABC’s. Let’s add a D) Lean Hog prices (bacon, Janet, think bacon) inflated another +3.7% last week taking their 1 and 3 month inflations to +7.7% and +25.5%, respectively.
I know, I know. I should stop cherry picking things like real world consumption items and use some nerdy Linear-Econ readings like “break-evens” and TIPS Yields, haha!
A) UST 10yr Break-even was up another +4 basis points to 2.28% = +40 basis points in the last 3 months
B) UST 10yr TIPS Yield was up another +4 basis points to -0.62% = +35 basis points in the last 3 months
C) UST 10yr Yield was up another +6 basis points to a new Cycle High of 1.62% last week
Yep, let them talk about the rear-view “levels” of inflation as we subscribers to The Secret To The Universe (calculus) continue to front-run their narratives with the Rates of Change of both GROWTH and INFLATION.
The ROCs (rates of change) in the numbers are what front-runs their future narratives.
For those of you who still have friends who do not know that the UST 10yr Yield going up +73 basis points in 3 months is very bullish for the Financials (XLF) because it steepened the Yield Curve by 70 basis points, let them know.
With the Financials (XLF) leading the recent #Quad2 ramp to a new SPY all-time high (XLF = +17.9% YTD), you gotta wonder why some people have been wasting their hard earned capital not being positioned for #InflationAccelerating?
European Equities (heavily indexed to the Financials) continued their recent outperformance (vs. a big place like China which is nowcasting #Quad3 in Q2) in Global #Quad2 as well:
A) Russian Stocks were up another +5.0% last week to +3.9% and +7.5% in the last 1 and 3 months
B) Swedish Stocks were up another +5.1% last week to +5.3% and +14.3% in the last 1 and 3 months
C) German Stocks were up another +4.2% last week to +3.2% and +10.6% in the last 1 and 3 months
I guess the narrative about Global Rates rising “being bearish” for all of Global Equities was fictional too.
Immediate-term @Hedgeye Risk Range with TREND signal in brackets:
UST 10yr Yield 1.43-1.67% (bullish)
UST 2yr Yield 0.12-0.18% (bullish)
SPX 3 (bullish)
RUT 2121-2378 (bullish)
NASDAQ 12,501-13,593 (neutral)
Energy (XLE) 48.11-55.33 (bullish)
Financials (XLF) 32.87-35.40 (bullish)
Shanghai Comp 3 (bearish)
DAX 14002-14760 (bullish)
VIX 19.61-28.91 (bearish)
USD 90.60-92.58 (bearish)
EUR/USD 1.181-1.212 (bullish)
USD/YEN 106.72-109.76 (bullish)
GBP/USD 1.381-1.408 (bullish)
CAD/USD 0.79-0.81 (bullish)
Oil (WTI) 61.08-68.21 (bullish)
Gold 1 (bearish)
Copper 3.94-4.25 (bullish)
Best of luck out there this week,
KM
Keith R. McCullough
Chief Executive Officer
