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ICYMI: ‘You Gotta Love Brexit’

Takeaway: Not the gloom and doom that many predicted, the FTSE 100 is up +14.6% since Britain’s E.U. referendum.


“In sharp contrast to the politicized-fear-mongering about Brexit, the British economy chugged along at +2.2% year-over-year growth in Q3. That was even better than the USA’s +1.7% year-over-year growth rate,” Hedgeye CEO Keith McCullough wrote recently. In other words, the U.K. economy is accelerating.


We like Britain’s pound on the long side (especially against the euro).


The Future for Obamacare: 3 Major Healthcare Policy Themes of 2017

The Future for Obamacare: 3 Major Healthcare Policy Themes of 2017 - obamacare trump

Since the election, everything has changed. Other than geo-politics and energy, there is no area of federal policy more poised for change than healthcare. In this piece, Healthcare Policy analyst Emily Evans dissects the future of Obamacare and the healthcare changes to expect out of President Trump and a GOP-controlled Congress.

Why Trump Didn't Kick-Start the U.S. Economy

Why Trump Didn't Kick-Start the U.S. Economy - trump hat making


Wall Street is betting that Donald Trump can kick-start the U.S. economy. The story goes that tax cuts and infrastructure spending will unleash a boom of pent-up economic activity. But let's not give the President-elect too much undue credit. Before he even takes office on January 20th, Trump will inherit an accelerating U.S. economy. Consider the evidence.

The market already sniffed out An Accelerating U.S. Economy


Sure, since Election Day, investors have been betting on Trump by buying the Russell 2000. It's up 14.8% since then, as a pure play, domestic-oriented stock index. But the market started to front-run U.S. growth accelerating back mid-2016. 


Check out the sector performance from June 30th until just before Trump's victory in the chart below. Utilities (XLU), the classic outperformer when U.S. growth is slowing, was lagging while sectors tied to U.S. growth accelerating, like Industrials (XLI), Financials (XLF) and Materials (XLB), started to lead the pack. Note: This was a complete reversal of the trend in which Utilities led the sectors and Financials lagged.


Treasury bond yields, another important barometer of economic activity, also bottomed around this time. (Falling bond yields generally portend slower growth and conversely yields often rise during acceleration.) On July 6th, the 10-year Treasury yield hit 1.32% and have backed-up to 2.5% today.


Why Trump Didn't Kick-Start the U.S. Economy - S P 500 Sector Performance

U.S. Growth Expectations Were Confirmed by Economic Data


Data collected just prior to Trump's win, rubber stamped the market's prediction that the U.S. economy had bottomed.


  • Durable goods and Retail Sales data for the month of October began improving.
  • Then previously recessionary Industrial Production data started to look up.
  • U.S. GDP for the third quarter stopped slowing, after five quarters of deceleration from 3.3% year-over-year growth in March 2015 to 1.3% in June 2016, .


Now that U.S. growth is so clearly accelerating, the U.S. dollar is ripping to the upside. As you can see in the Chart of the Day below, in the fourth quarter alone, the dollar was up +8.5%.


(Note: When U.S. growth and inflation are accelerating, we call this Quad 2 in our proprietary GIP model [Growth, Inflation, Policy]. To learn more check out, "A Closer Look At How We Actually Model The U.S. Economy.")


Why Trump Didn't Kick-Start the U.S. Economy - 01.03.17 EL Chart


Now, to be fair, Trump can be credited with instilling a countrywide euphoria (i.e. Trumphoria) that has been spilling into recently reported November economic data. Time will tell whether it's justified but for the time being the data corrobates Wall Street's #TrumpTrade.

Bottom Line


To be sure, we're in for an interesting 2017 under President Trump. This morning's mainstream media freakout is over Trump's tweets related to the ongoing tit-for-tat trade battles with China, the nuclear armament of North Korea, a border tax on General Motors and the wholesale repeal of Obamacare.


But a lot can happen in between Trump's 140 character tweet storms and the signing of actual legislation. In terms of market implications, we'll have to wait and see how this all shakes out. (Hedgeye's Washington Policy research team offered up their Trump policy predictions in a recent HedgeyeTV special, "Our Top Five Trump Administration Investing Themes.")


For now, we remain bullish on U.S. stocks as the economy continues to accelerate, at least until Inauguration Day.

Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.

8 Videos: What's On HedgeyeTV

Our deep bench of analysts take to HedgeyeTV every weekday to update subscribers on Hedgeye's high conviction stock ideas and evolving macro trends. Whether it's on The Macro ShowReal-Time Alerts Live or other exclusive live events, HedgeyeTV is always chock full of insight.


Below is a taste of the most recent week in HedgeyeTV. (Like what you see? Click here to subscribe for free to our YouTube channel.)




1. Dale: Strong Dollar = Strong America (12/30/2016)



Here’s an obvious statement: The U.S. is a consumer-driven economy. Duh, right?


So that’s why we’re scratching our heads over recent mainstream media headlines suggesting a rising dollar is going to handicap U.S. industries. It’s illogical. A strengthening dollar means Americans have more purchasing power (i.e. they can buy more goods).


2. A Deep Dive Into Our 4 Favorite Healthcare Shorts (12/30/2016)



The worst (let’s repeat… worst) sector in the S&P 500 this year has been Healthcare. It’s not even close. Here are some of our favorite Healthcare shorts via CEO Keith McCullough and Healthcare analyst Andrew Freedman. 


3. Sell This Cyclical Stock (12/29/2016)



Sell Wabtec (WAB)? Yes.


The $7 billion rail equipment manufacturer is not a growth stock. After a major investment cycle in rail equipment, over the last ten-plus years, the industry is slowing explains Hedgeye Industrials analyst Jay Van Sciver in the video above. 


4. Sell HCA: Here’s Why The Stock Has 30% Downside (12/29/2016)


8 Videos: What's On HedgeyeTV - Healthcare Sell HCA 12 28 16 TT


As an investor, what do you do with a company whose core business is slowing and has low quality assets? Simple. You sell it. That’s the gist of our Healthcare analyst Tom Tobin’s outlook for HCA Holdings (HCA).


5. Did Trump Change the Republican Party Forever? (12/28/2016)



Donald Trump’s Election Day victory will go down in history for many reasons.


“This is probably the most incredible election ever in that we’ve never had a time when someone lost the popular vote by so much, and won the presidency without going to a vote in the House of Representatives,” says historian, author and Hedgeye Demography Sector Head Neil Howe.


6. ‘A Great Deal of Illusory Risk’: Sell Broadcom | $AVGO (12/28/2016)


8 Videos: What's On HedgeyeTV - Technology AJ AVGO 12.15.2016


Broadcom (AVGO) is a Wall Street darling. That might not last much longer.


7. What The Media Missed: Strong Dollar Doesn’t ‘Threaten’ U.S. Economy (12/27/2016)



The U.S. Dollar just hit a 14-year high against the Euro. While the mainstream media thinks this is cause for alarm, the facts belie this convenient narrative. 


8. 3 Reasons to Sell Wabtec | $WAB (12/27/2016)


8 Videos: What's On HedgeyeTV - Industrials JVS WAB 12 9.16.2016 b


The $7 billion rail equipment manufacturer Wabtec (WAB) is fighting a cyclical downturn in its business. The company has tried to plug the gap with an acquisition that hasn’t lived up to the hype. Now, the Chinese politburo has set some very aggressive goals that will directly compete with Wabtec’s business.


Click here to subscribe for free to our YouTube channel.

Cartoon of the Day: Happy New Year!

Cartoon of the Day: Happy New Year! - New Years cartoon 12.30.2016


A happy New Year to you and your loved ones from all of us here at Hedgeye.



Click here to receive our daily cartoon for free.

Thank You

"When you rise in the morning, give thanks for the light, for your life, for your strength. Give thanks for your food and for the joy of living. If you see no reason to give thanks, the fault lies in yourself."



Dear Friends,


To say it has been interesting year would be an understatement. Whether it be the U.S. election, the E.U. referendum in the U.K., or various other global Marco surprises, it has been a tough year to manage and interpret. 


On some level, all we can really manage is what we and our teams do from day-to-day. In 2016, there were a lot of changes at Hedgeye and most of them involved adding more content to better serve you. 


Early in the year we added Potomac Research's policy team to our platform. Then we added Neil Howe, the demographics legend. And finally, into Q4, we added Ami Joseph, who will lead our technology research efforts. 


As the dust settles on 2016, we will have grown our revenue year-over-year by almost 40% and our head count has grown to nearly 80 people. It feels like a far cry from 9 years ago when a small group of us were in New Haven touting the idea of Wall Street 2.0. 


Regardless of how successful a year it has been for Hedgeye, we realize it is all due to our friends, partners and subscribers. We are lucky to say that in many instances a good portion of you fit into all three categories. 


So as the year winds down, we wanted to take a quick opportunity to thank you. We look forward to working with you in 2017 and beyond. 


Best regards,


Daryl G. Jones

Director of Research 


Thank You - 12 30 2016 9 29 21 AM

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