The Biggest Buying Opportunity in 5 Months



All three major U.S. stock market indices fell over 1% yesterday ... the Dow and Nasdaq posting their single worst day of losses in five months. In other words, the U.S. stock market is on sale today.


We say buy it.


U.S. economic growth, profits and employment will all continue to accelerate, at least through the third quarter of 2017. 


You won't hear this from the mainstream financial media this morning. Instead, partisan news outlets seemed to relish the opportunity to bash President Trump.


  • WSJ: Stocks Suffer Worst Day of Year as Confidence in Trump’s Agenda Wavers
  • The Atlantic: The Stock Market’s Biggest Decline Since Trump’s Election
  • MarketWatch: Selloff in U.S. stocks set to pick up again as ‘Trump trade’ dwindles


Take your pick of words to describe this – bluster, blather, drivel – then move on. The actual data, not partisan punditry, will set you free. Speaking of data, as we wrote recently, the Consumer Price Index (CPI) and Retail Sales are at or near five year highs.


Want more data? "Here's what one of the biggest buying opportunities in 4-5 months looked like yesterday," writes Hedgeye CEO Keith McCullough this morning.


See the Chart of the Day below...


The Biggest Buying Opportunity in 5 Months - s p 500 performance

Bottom Line

Don't let your politics blind you. With U.S. growth, profits and employment heating up, there are a lot of things on sale and worth buying this morning in the U.S. stock market. And just in case you still don't think you should buy the dip, we encourage you to take another look at the Dennis Gartman contra-indicator at the top of this piece. It's flashing buy as well...

Europe Is Exuberant Today! Short It.

Europe Is Exuberant Today! Short It. - Eurozone cartoon 02.21.2017


Investors swooned over the apparent victory of centrist party candidate Emmanuel Macron in last night's French Presidential debate. The consensus among pundits is anti-E.U. candidate Marine Le Pen took a drubbing.


The euro "surged" to a seven-week high on the news. 


The pleasant narrative being passed around now is that in the wake of national election voting out of the Netherlands, where the far-right party did far worse than expected, fears of political tumult are waning. This has pushed European stock markets to their highest level since 2015. 


It's a nice story.


But as geopolitical expert Pippa Malmgren points out in a new HedgeyeTV video, France's Le Pen and Macron are both political outsiders looking to shake up establishment Euro-area orthodoxy.


While frontrunner Macron isn't a populist hardliner like Le Pen, Malmgren points out that both support policies reflecting broader trends on the Continent (and globally) toward "a smaller state, [with] more personal freedom, especially more entrepreneurial freedom... because you can't depend on the state. They're broke."


Our take: Don't expect placid markets or exuberance to rule the day for long...

There's a lot of time before French voting on April 23rd...


So what should investors do today?


  1. Short Euros (vs. U.S. Dollar)
  2. Book gains in European Equities


Today's Chart of the Day shows our proprietary and dynamic daily trading ranges for the Euro versus the U.S. Dollar. The trading ranges suggest that, on a period of 3-weeks or less, the Euro would likely trade in a range of 1.05 to 1.08. With the euro tapping the top end of that range, now is a good time to sell or short euros. 


There's a bigger picture headwind for the euro too. As economist and author Daniel Lacalle points out in a Guest Contributor post titled "Are You Prepared For The End Of The Bond Bubble?," the U.S. and Europe are pursuing diametrically opposing fiscal and monetary policies that should cause U.S. dollar strength and euro weakness.


Check it out.


Europe Is Exuberant Today! Short It. - 03.21.17 E chart

Has the European Project Come to an End?” 

We have some thoughts on this important question. On Thursday, March 23rd at 11:00am ET, Macro analysts Matt Hedrick and Darius Dale will be hosting an institutional research call on this very subject.


We’ll offer our view on the changing political nature of the EU and Eurozone and provide a detailed quantitative and fundamental outlook on the region. (Institutions can ping for access.)

Economic Acceleration? Your Decision Will Impact Your Portfolio Performance

Economic Acceleration? Your Decision Will Impact Your Portfolio Performance - boxing gloves image


There's a fight playing out right now among investors in the U.S. stock market on which way economic growth is heading. As you’ll see in the numbers below, it's a fair fight right now from a performance perspective. But we think that's going to change very soon. 


(For more, click here to get 3 specific trading ideas from this morning's Early Look.)


Breaking down the S&P 500 year-to-date performance by sectors reveals this emerging conflict:


  • Financials (XLF): +5.2%
  • Utilities (XLU): +5.5%
  • S&P 500: +6.2%


As a reminder, the Utilities sector outperforms the broader stock market when U.S. economic growth slows and interest rates fall. On the other hand, Financials outperform the broader stock market when U.S. economic growth accelerates and interest rates rise. 


Investors placed bets last week that were crystal clear. Interest rates fell and here's what happened in Utilities and Financials:


  1. Financials (XLF) were down -1.3% week-over-week
  2. Utilities (XLU) were up +0.5% week-over-week


Which side of this fight are you on? U.S. #GrowthAccelerating or U.S. #GrowthSlowing...


In today's Early Look, Hedgeye CEO Keith McCullough explains which side we’re on, why we’re on it and how investors can take advantage of this emerging fight.


In fact, we've got three specific ideas.


Click here to learn more.


Economic Acceleration? Your Decision Will Impact Your Portfolio Performance - 03.20.17 EL Chart 2


U.S. Manufacturing Is Still En Fuego

U.S. Manufacturing Is Still En Fuego - manufacturing activ

Source: The National Archives UK


U.S. manufacturing and industrial is white hot. You might say it's "en fuego."


Inside regional manufacturing data out of Philadelphia and New York, certain key components are hitting multi-decade highs. As Hedgeye Senior Macro analyst Christian Drake writes in today's Early Look:


"Philly Fed: Beat expectations for March as New Orders rose to the highest level since 1987.  We certainly don’t anchor our outlook on a single regional survey but multi-decade highs are notable, particularly when the series is trending with the balance of the other regional and national manufacturing/industrial activity indicators.


Also notably, the capex plans component rose to its highest level in 18 years, according with the investment plans component of the Empire Manufacturing Index. As can be seen in the Chart of the Day below, the early March data has our composite Capital Expenditures Plans Index tracking at its highest level in over a decade."


(On a related note, read "2 Charts: Reiterating Our US #GrowthAccelerating Call.")


U.S. Manufacturing Is Still En Fuego - CoD Capex 3 17 17

There's No Other Way to Say This: Fed Forecasts Are Flat-Out Wrong

There's No Other Way to Say This: Fed Forecasts Are Flat-Out Wrong - yellen image1


The Federal Reserve raised rates yesterday. "The simple message is -- the economy is doing well," Federal Reserve Chair Janet Yellen said following yesterday's Federal Open Market Committee meeting, which makes U.S. monetary policy decisions.


That was a smart decision considering, the U.S. economy is, in fact, accelerating. We have a GDP tracker that tells us just that.


But the Fed is clueless about what's next for the U.S. economy. Yes, clueless...


Following yesterday's rate hike decision, the Fed cut the top-end of its 2017 GDP forecast and now has a range of +1.7-2.3% year-over-year growth. Meanwhile, the Atlanta Fed's GDPNow forecasting algorithm suggests the U.S. economy will grow just 0.9% in the first quarter of 2017. "That's really funny," says Hedgeye CEO Keith McCullough in today's Early Look:


"I have no idea how the Atlanta Fed  “tracker” is down at +0.9% GDP for Q1, but Darius and I quite like it when establishment economics departments have wildly varying forecasts vs. our own.


As you can see in today’s Chart of The Day, the Atlanta Fed’s GDP forecasts have 230 basis points of intra-quarter revisions (tracking error) since inception on a number that has a typical 0-300 basis point range. #lol"


There's No Other Way to Say This: Fed Forecasts Are Flat-Out Wrong - Chart of the Day 3 16 17

Are You Bullish Enough? Inflation & Retail Sales Near 5-Year Highs

Are You Bullish Enough? Inflation & Retail Sales Near 5-Year Highs - bull or bear


Are you bullish enough on U.S. growth? That's a healthy question all investors should be asking themselves, especially in light of some seriously hot U.S. economic data this morning. The February Consumer Price Index (CPI) reading is just shy of a five-year high as reported this morning.


And despite Bloomberg suggesting Retail Sales "posted the smallest gain in six months" (on a month-over-month basis), year-over-year retail sales data hit the highest level since March 2012


(Click here to read a wrap of recently reported U.S. economic data.)


Hedgeye vs. Wall Street: U.S. Growth

#Economy #GDP 


So what's our current U.S. economic outlook? As you can see in the Chart of the Day below from today's Early Look, we're significantly more bullish than Wall Street consensus. Here are the numbers...


  • Hedgeye U.S. Real GDP estimates (year-over-year): Q1 = +2.28%; Q2 = +2.59%; Q3 = +2.89%; Q4 = +3.09%.
  • Wall Street Consensus Real GDP estimates (year-over-year): Q1 = +2.20%; Q2 = +2.45%; Q3 = +2.20%; Q4 = +2.30%.


Does your portfolio reflect the bullishness to come?


Are You Bullish Enough? Inflation & Retail Sales Near 5-Year Highs - Chart of the Day 3 15 17