PRESENTATION MAIN TITLEdocs.hedgeye.com/HE_GlobalFinancialMarkets_8.5.14.pdf · 2014-08-05 ·...

PRESENTATION MAIN TITLE PRESENTATION SUBTITLE JAN 1, 2015

TEAM MEMBER ONE TEAM MEMBER TWO

TEAM MEMBER THREE TEAM MEMBER FOUR

HEDGEYE 2

DISCLAIMER Hedgeye Risk Management is a registered investment advisor, registered with the State of Connecticut. Hedgeye Risk Management is not a broker dealer and does not provide investment advice for individuals. This research does not constitute an offer to sell, or a solicitation of an offer to buy any security. This research is presented without regard to individual investment preferences or risk parameters; it is general information and does not constitute specific investment advice. This presentation is based on information from sources believed to be reliable. Hedgeye Risk Management is not responsible for errors, inaccuracies or omissions of information. The opinions and conclusions contained in this report are those of Hedgeye Risk Management, and are intended solely for the use of Hedgeye Risk Management’s clients and subscribers. In reaching these opinions and conclusions, Hedgeye Risk Management and its employees have relied upon research conducted by Hedgeye Risk Management’s employees, which is based upon sources considered credible and reliable within the industry. Hedgeye Risk Management is not responsible for the validity or authenticity of the information upon which it has relied.

TERMS OF USE This report is intended solely for the use of its recipient. Re-distribution or republication of this report and its contents are prohibited. For more details please refer to the appropriate sections of the Hedgeye Services Agreement and the Terms of Use at www.hedgeye.com

DISCLAIMER

SECTION I: QUANT SIGNALS

HEDGEYE 4

US DOLLAR: BREAKING OUT WILL THE DOLLAR CONFIRM ITS QUANTITATIVE BREAKOUT?

73.50

75.50

77.50

79.50

81.50

83.50

85.50 US DOLLAR INDEX BULLISH TREND = 80.78 BULLISH TAIL = 81.33

Data Source: Bloomberg

HEDGEYE 5

EURO: BEARISH THE EURO WOULD SEEM TO SUPPORT A BULLISH USD SCENARIO

1.30

1.31

1.32

1.33

1.34

1.35

1.36

1.37

1.38

1.39

1.40 EUR/USD SPOT BEARISH TREND = 1.36 BEARISH TAIL = 1.35


HEDGEYE 6

BRITISH POUND: BULLISH POLICY REMAINS SUPPORTIVE OF THE GBP – FOR NOW

1.50

1.55

1.60

1.65

1.70

1.75 GBP/USD SPOT BULLISH TREND = 1.68 BULLISH TAIL = 1.65


HEDGEYE 7

JAPANESE YEN: BEARISH AT BEST, THE JPY IS RANGE-BOUND AMID STRUCTURAL “5% MONETARY MATH” TARGETS

95

97

99

101

103

105

107 USD/JPY SPOT BULLISH TREND = 101.9 BULLISH TAIL = 100.03


HEDGEYE 8

US RATES: BEARISH STILL NOT BUYING CONSENSUS’ “GOLDILOCKS” STORYTELLING

2.4

2.5

2.6

2.7

2.8

2.9

3.0

3.1 UST 10Y YIELD (%) BEARISH TREND = 2.81 BEARISH TAIL = 2.61


HEDGEYE 9

EUROPEAN EQUITIES: BEARISH YES, SANCTIONS ARE A FACTOR, BUT THERE’S A LOT MORE TO THIS BREAKDOWN THAN THAT

8,050

8,250

8,450

8,650

8,850

9,050

9,250

9,450

9,650

9,850

10,050 GERMANY DAX INDEX BEARISH TREND = 9791 BEARISH TAIL = 9265


HEDGEYE 10

COMMODITIES: BREAKING DOWN A CONSUMPTION TAX CUT THAT WILL FILTER THOUGH ON A LAG

270

275

280

285

290

295

300

305

310

315 CRB INDEX BEARISH TREND = 296 BULLISH TAIL = 291


HEDGEYE 11

ENERGY: COLLAPSING WE’RE SORRY… GEOPOLITICAL WHAT?

89

91

93

95

97

99

101

103

105

107 WTI CRUDE OIL ($/bbl.) BEARISH TREND = 101.89 BEARISH TAIL = 100.27


HEDGEYE 12

GOLD: SEARCHING FOR DIRECTION THE AFOREMENTIONED SIGNALS MAKE IT TOUGH TO GROSS UP EXPOSURE TO GOLD HERE

1,180

1,220

1,260

1,300

1,340

1,380

1,420 GOLD SPOT ($/ozt.) BULLISH TREND = 1271 BEARISH TAIL = 1323


HEDGEYE 13

TACRM: “SELL EVERYTHING EUROPE!”

HEDGEYE 14

TACRM: “NOTE THE LAGGARDS” EUROPEAN EXPOSURES AND INDIVIDUAL COMMODITY MARKETS CONTINUE TO HEAD UP THE REAR

1.9x 1.9x

1.8x 1.7x 1.7x 1.6x

1.6x 1.6x 1.6x

1.5x 1.5x 1.5x

1.5x 1.4x

1.3x 1.3x 1.3x 1.3x

1.3x 1.2x

-1.4x -1.4x -1.5x

-1.5x -1.5x

-1.5x -1.6x

-1.6x -1.6x

-1.6x -1.7x -1.7x -1.7x

-1.8x -1.9x

-1.9x -1.9x

-2.0x -2.1x

-2.4x

-3.0x -2.5x -2.0x -1.5x -1.0x -0.5x 0.0x 0.5x 1.0x 1.5x 2.0x 2.5x

(EWH) iShares MSCI Hong Kong ETF (FXI) iShares China Large-Cap ETF

(CHIX) Global X China Financials ETF (EU) WisdomTree Euro Debt Fund

(GMF) SPDR S&P Emerging Asia Pacific ETF (NIB) iPath Dow Jones-AIG Cocoa Total Return Sub-Index ETN

(DBB) PowerShares DB Base Metals Fund (AAXJ) iShares MSCI All Country Asia ex Japan ETF

(EWY) iShares MSCI South Korea Capped ETF (CHXX) EGShares China Infrastructure ETF

(WDTI) WisdomTree Managed Futures Strategy Fund (FOIL) iPath Pure Beta Aluminum

(BNDX) Vangaurd Total International Bond Market ETF (UUP) PowerShares DB US Dollar Index Bullish Fund

(JO) iPath Dow Jones-AIG Coffee Total Return Sub-Index ETN (EWS) iShares MSCI Singapore ETF

(FLAT) iPath US Treasury Flattener ETN (PICK) iShares MSCI Global Metals & Mining Producers ETF

(ZROZ) PIMCO 25+ Year Zero Coupon US Treasury Bond ETF (EPU) iShares MSCI All Peru Capped ETF

(UGA) United States Gasoline Fund (EWD) iShares MSCI Sweden ETF

(EZU) iShares MSCI EMU ETF (WEAT) Teucrium Wheat Fund

(EWQ) iShares MSCI France ETF (FXE) CurrencyShares Euro Trust (SOYB) Teucrium Soybean Fund

(EWN) iShares MSCI Netherlands ETF (ITB) iShares U.S. Home Construction ETF (EPOL) iShares MSCI Poland Capped ETF

(DBC) DB Commodity Index Tracking Fund (EWGS) iShares MSCI Germany Small-Cap ETF

(EWG) iShares MSCI Germany ETF (UDN) Powershares DB US Dollar Index Bearish Fund

(SGG) iPath Dow Jones AIG Sugar Total Return Sub-Index ETN (JNK) SPDR Barclays High Yield Bond ETF

(CORN) Teucrium Corn Fund (BAL) iPath Dow Jones AIG Cotton Total Return Sub-Index ETN

(EWO) iShares MSCI Austria Capped ETF (BKLN) Senior Loan Portfolio ETF

Extreme Temperatures (Top 20 Hottest and Top 20 Coldest Markets)

Data Source: Bloomberg. Temperature = Volatility-Adjusted Multi-Duration Momentum Indicator score. See TACRM™ white paper for more details.

HEDGEYE 15

TACRM: “FX & COMMODITIES SLIPPING” ASSET ALLOCATORS ARE ROTATING OUT OF FX AND COMMODITIES

Fixed Income & Yield Chasing = 24%

DM Equities = 21%

EM Equities = 24%

Foreign Exchange = 12% Commodities = 13%

Cash = 6%

-8%

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

8%

-15% -14% -13% -12% -11% -10% -9% -8% -7% -6% -5% -4% -3% -2% -1% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15%

y-a

xis

: Se

aso

n (

pp

t. D

elt

a f

rom

Tra

ilin

g 3

M A

ve

rag

e W

ea

the

r F

ore

cast

)

x-axis: Prevailing Climate (ppt. Delta from TTM Average Weather Forecast)

TACRM GLOBAL MACRO WEATHERVANE

Weather Forecast

Data Source: Bloomberg. Weather Forecast = a relative measure of intra-asset class dispersion designed to produce a dynamic asset allocation that is optimized for existing market conditions. See TACRM™ white paper for more details.

HEDGEYE 16

IS QUAD #4 A PROBABLE SCENARIO? THE BREAKOUT IN THE USD, THE BREAKDOWN IN COMMODITIES (LED BY ENERGY) AND THE WIDENING OF CREDIT SPREADS ARE ALL SIGNALING A MOVE TO QUAD #4 IS INCREASINGLY LIKELY FOR THE US

HEDGEYE 17

WHAT IS “QUAD #4” EXACTLY? GROWTH SLOWING AS INFLATION DECELERATES… GET DEFENSIVE

1Q13 2Q13

3Q13

4Q13

1Q14

2Q14

3Q14E

4Q14E

-125bps

-75bps

-25bps

25bps

75bps

125bps

-75bps -50bps -25bps 0bps 25bps 50bps 75bps

x-axis: second derivative of HEADLINE INFLATION reading y-axis: second derivative of REAL GDP reading

Source: Bloomberg data;

Hedgeye calculations. Color-coded data in the

adjacent table represent actual reported figures unless

otherwise noted.

SECTION II: GIP FUNDAMENTALS

HEDGEYE 19

REVIEWING THE DOMESTIC SETUP EMPLOYMENT AND CONFIDENCE NOT RHYMING WITH EVIDENCE OF #CONSUMERSLOWING

HEDGEYE 20

COMMODITY DEFLATION SUPPORTIVE THE US CONSUMER IS GETTING UN-SQUEEZED AT THE MARGINS

-1.5% -0.3%

0.7% 1.6% 1.9%

0.3%

-0.7% -0.1%

1.5%

0.0%

1.9% 1.4% 1.5% 2.0% 2.0% 1.9% 1.7% 1.9%

0.7%

-0.5%

0.3%

-7.3% -6.9%

-2.4%

2.3%

0.4% 0.9% 1.1%

2.0% 1.8%

-0.9% -0.1% -0.2%

0.0% 0.8%

-1.0%

0.7%

-0.6%

0.9% 1.3% 1.4%

-2.4%

2.1% 2.8%

1.6% 1.1%

-0.1%

1.3% 1.0% 0.7% 0.2%

2.3%

0.1%

-1.1%

0.9% 1.8%

0.1%

-1.0% -0.2%

-0.9%

1.5% 1.5% 1.3%

-0.1% -0.9% -0.5%

2.7%

0.6%

-0.5%

0.5%

-0.3% -0.2% -0.3%

1.0%

-0.5%

0.2% 0.9%

0.2%

-0.9% -1.4%

-0.4% -0.2% -0.5%

0.1% 0.9%

1.8%

3.4%

0.9%

-0.5% -0.9% -0.9%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20% Hedgeye Macro Consumer Squeeze Index MoM Hedgeye Macro Consumer Squeeze Index YoY

The Hedgeye Macro Consumer Squeeze Index is a consumption-weighted basket of the rates of change in Rent, Food (i.e. corn, wheat, rice, poultry, pork and beef), Utilities and Gasoline prices per US median consumer PCE. Data Source: Bloomberg. Forecasts through EOY '14 assume no change to current prices, except for the price of gasoline, which is seasonal. Seasonality is taken into account in that regard.

?

HEDGEYE 21

AS ARE LAGGING INDICATORS CAPEX AND EMPLOYMENT GROWTH TENDS TO PEAK RIGHT BEFORE RECESSIONS OCCUR

2.3%

5.2% 5%

-6%

-3%

0%

3%

6%

9%

12%

15%

18%

21%

Real Gross Domestic Income: Compensation of Employees Paid (billons of 2014 dollars) - CAGR (5Y)

Real Gross Domestic Product: Nonresidential Fixed Investment (billons of 2014 dollars) - CAGR (5Y)

Real Gross Domestic Income: Corporate Profits After Tax (billons of 2014 dollars) - CAGR (5Y)

Data Source: Bloomberg. Shaded areas indicate recessions. We use a 5Y CAGR to account for the mean length of economic expansions throughout the past century.

HEDGEYE 22

HOUSING REMAINS A DISASTER AUTOCORRELATION MEANS HOUSING IS LIKELY TO REMAIN A SLOW-MOVING TRAIN WRECK

HEDGEYE 23

OLD FORMAT = $800/SQUARE FT NEW FORMAT = $1,300 SQ FT

REGULATION IS CRUSHING DEMAND

HEDGEYE 24

THE 2Q BOUNCE CAME AND WENT THE PEAK RATE OF IMPROVEMENT IS SQUARELY IN THE REARVIEW MIRROR

100.0% 100.0%

89.6%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Trailing 3M Trailing 12M Trailing 3Y

Bloomberg US Economic Surprise Index (Percentile of JUL 16th YTD Peak Reading)

Data Source: Bloomberg.

HEDGEYE 25

SHHH… DON’T TELL THE FED SINCE 2010, THE FED HAS BEEN CONSISTENTLY WRONG ON ITS GROWTH FORECASTS BY AN AVERAGE OF 98 BASIS POINTS

3.2%

3.7%

2.5% 2.6%

3.5%

3.2%

2.7%

2.5%

3.3%

2.8%

1.9%

2.2%

2.5%

1.7% 1.8%

2.3%

2.5%

1.6%

2.3% 2.2%

95bps

205bps

-55bps

35bps

-100bps

-50bps

0bps

50bps

100bps

150bps

200bps

250bps

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

2010 2011 2012 2013

Q1 FOMC Forecast Q2 FOMC Forecast Q3 FOMC Forecast

Q4 FOMC Forecast Actual Full-Year Real GDP Growth Rate Maximum Mid-Year Tracking Error (rhs)


HEDGEYE 26

SHHH… DON’T TELL CONSENSUS NEVER BEFORE IN US ECONOMIC HISTORY HAVE WE SEEN WHAT CONSENSUS IS EXPECTING FOR GDP GROWTH

3.0%

2.1%

2.5% 2.7% 2.8%

3.5%

3.1% 3.1% 3.1% 3.1% 3.1% 3.0%

1.5%

1.0%

1.8%

1.5% 1.5%

2.7% 2.9% 2.9% 3.0% 3.0% 3.0% 3.0%

2.7%

1.8%

4.5%

3.5%

-2.1%

4.0%

-2.5%

-1.5%

-0.5%

0.5%

1.5%

2.5%

3.5%

4.5%

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15

Bloomberg Consensus US GDP Forecast: Peak Estimate Bloomberg Consensus US GDP Forecast: Trough Estimate Actual


HEDGEYE 27

STYLE FACTOR RISK ARE POLLYANNAISH GROWTH EXPECTATIONS ONCE AGAIN FUELING ASSET MISPRICINGS?

HIGH Dividend Yield

LOW Dividend Yield

HIGH Long-term EPS Growth

LOW Long-term EPS Growth

HIGH NTM Sales Growth

LOW NTM Sales Growth

HIGH Consensus Rating

LOW Consensus Rating

HIGH Beta

LOW Beta

y = 0.197x - 0.4283 R² = 0.8257

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

-5% 0% 5% 10% 15% 20% 25% 30% 35% 40%

x-axis: TTM Peformance; y-axis: Trailing 3M Performance Linear (x-axis: TTM Peformance; y-axis: Trailing 3M Performance)

Data Source: Bloomberg. Average performance of top and bottom decile for given style factor and duration.

HEDGEYE 28

FOREX RISK RIGHTLY OR WRONGLY, THE CURRENCY MARKET IS BEING HELD HOSTAGE BY THE CONSENSUS MACRO NARRATIVE

79.00

79.50

80.00

80.50

81.00

81.50

82.00

82.50

83.00

-28bps

-24bps

-20bps

-16bps

-12bps

-8bps

-4bps

0bps

4bps

8bps

12bps

16bps

20bps

US Dollar Index 1YR OIS Spread (bps; weighted by DXY basket) US Dollar Index 2YR OIS Spread (bps; weighted by DXY basket)

US Dollar Index


HEDGEYE 29

“WHATEVER IT TAKES” ECB PRESIDENT MARIO DRAGHI APPARENTLY MEANS BUSINESS

1.30

1.31

1.32

1.33

1.34

1.35

1.36

1.37

1.38

1.39

1.40

-42bps

-36bps

-30bps

-24bps

-18bps

-12bps

-6bps

0bps

6bps

12bps

18bps EUR-USD 1YR Swap Spread (bps) EUR-USD 2YR Swap Spread (bps) EUR/USD Spot (rhs)


HEDGEYE 30

SHORT THE EURO? SINCE THE ONSET OF THE EUROZONE SOVEREIGN DEBT CRISIS, BUY-SIDE CONSENSUS HAS BEEN GOOD AT FRONT-RUNNING BREAKDOWNS IN THE COMMON CURRENCY

$1.20

$1.25

$1.30

$1.35

$1.40

$1.45

$1.50

(250,000)

(200,000)

(150,000)

(100,000)

(50,000)

-

50,000

100,000

150,000

Bloomberg CFTC CME Euro Net Non-Commercial Combined Positions (Futures and Options)

Trailing 52-Week Average

2x Standard Deviations

(2x) Standard Deviations

EUR/USD Spot (rhs)


HEDGEYE 31

PRESSURE MOUNTING? FALLING WELL SHORT OF OFFICIAL TARGETS, IT IS LIKELY THAT DRAGHI CONTINUES TO EASE EUROZONE MONETARY POLICY OVER THE INTERMEDIATE TERM

HEDGEYE 32


BRING ON THE DEFLATIONISTAS

HEADLINE INFLATION: THREE YEARS OF SLOWING

CORE INFLATION: WELL BELOW “PRICE STABILITY”

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

1.8%

EUROZONE CORE CPI YoY % CHANGE = 0.8%

SMAVG(3) = 0.8%

SMAVG(6) = 0.8%


0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

EUROZONE HEADLINE CPI YoY % CHANGE = 0.4%

SMAVG(3) = 0.5%

SMAVG(6) = 0.6%


HEDGEYE 33

BLAME AUSTERITY? THE KEYNESIANS WILL TURN TO DRAGHI FOR SUPPORT

-8.0%

-7.0%

-6.0%

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0% EUROZONE BUDGET BALANCE/GDP RATIO = -2.1% TTM AVERAGE = -3.1%


HEDGEYE 34

BUSINESS CONFIDENCE: SOFTENING EUROZONE BUSINESS CONFIDENCE IS INFLECTING TO THE DOWNSIDE

-90

-80

-70

-60

-50

-40

-30

-20

-10

0

10 ZEW Eurozone Assessment of Current Situation = -31.5 SMAVG(3) = -28.3 SMAVG(6) = -32


HEDGEYE 35


RUSSIAN SANCTIONS AREN’T HELPING

HEDGEYE 36

INDUSTRIAL PRODUCTION: SLOWING EUROZONE PRODUCTION GROWTH HAS INFLECTED TO THE DOWNSIDE

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0% EUROZONE INDUSTRIAL PRODUCTION YoY % CHANGE = 0.5% SMAVG(3) = 0.7% SMAVG(6) = 1.2%


HEDGEYE 37

MANUFACTURING PMI: SLOWING EUROZONE MANUFACTURING ACTIVITY HAS INFLECTED TO THE DOWNSIDE

44

46

48

50

52

54

56 EUROZONE MANUFACTURING PMI = 52.2 SMAVG(3) = 52.5 SMAVG(6) = 53.1


HEDGEYE 38

CONSUMER CONFIDENCE: SOFTENING EUROZONE CONSUMER CONFIDENCE IS INFLECTING TO THE DOWNSIDE

-30

-25

-20

-15

-10

-5

0 European Commission Consumer Confidence Indicator Eurozone = -8.4 SMAVG(3) = -7.7 SMAVG(6) = -8.9


HEDGEYE 39

RETAIL SALES: PEAKING EUROZONE CONSUMPTION GROWTH IS INFLECTING TO THE DOWNSIDE

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0% EUROZONE RETAIL SALES YoY % CHANGE = 0.7% SMAVG(3) = 1.2% SMAVG(6) = 0.8%


HEDGEYE 40

QUAD #3 INDEFINITELY? FACING A GAUNTLET OF STEEPENING GROWTH COMPS AMID DRAMATICALLY EASING CPI COMPARES

1Q13

2Q13

3Q13

4Q13

1Q14

2Q14E

3Q14E

4Q14E

-100bps

-80bps

-60bps

-40bps

-20bps

0bps

20bps

40bps

60bps

80bps

100bps






otherwise noted.

HEDGEYE 41

WHAT ABOUT CHINA? EXPANSIONARY POLICY HAS STABILIZED CHINESE GROWTH

HEDGEYE 42

CHINA’S STIMULUS TAILWIND THE “PUNCHBOWL” SHOULD BE HERE FOR AT LEAST ONE MORE QUARTER

HEDGEYE 43

GET IT WHILE IT’S HOT CHINA HAS BEEN A STRANGER TO QUAD #1, SO TAKE ADVANTAGE OF BETA WHILE IT’S HERE

1Q13 2Q13

3Q13

4Q13

1Q14

2Q14 3Q14E

4Q14E

-40bps

-30bps

-20bps

-10bps

0bps

10bps

20bps

30bps

40bps

-70bps -50bps -30bps -10bps 10bps 30bps 50bps 70bps





otherwise noted.

HEDGEYE 44

WHAT ABOUT JAPAN? POST-TAX HIKE STABILIZATION SHOULD KEEP THE BOJ AT BAY THROUGH YEAR-END

HEDGEYE 45

BOJ TO HEAT UP THIS WINTER BY YEAR’S END, TWO CONSECUTIVE QUARTERS OF EASING INFLATION SHOULD PROVIDE KURODA WITH ENOUGH MOTIVE AND POLITICAL COVER TO EXPAND QQE

1Q13

2Q13 3Q13

4Q13 1Q14

2Q14E

3Q14E

4Q14E

-250bps

-200bps

-150bps

-100bps

-50bps

0bps

50bps

100bps

150bps

200bps

250bps

-250bps -200bps -150bps -100bps -50bps 0bps 50bps 100bps 150bps 200bps 250bps





otherwise noted.

HEDGEYE 46

UK: AS GOOD AS IT GETS FOR NOW CAMERON, OSBORNE, AND CARNEY HAVE UK INFLATION IN CHECK FOR NOW

1Q13

2Q13

3Q13

4Q13

1Q14 2Q14

3Q14E

4Q14E

-125bps

-75bps

-25bps

25bps

75bps

125bps






otherwise noted.

HEDGEYE 47

#VOLATILITYASYMMETRY REMAINS GLOBAL FINANCIAL MARKETS ARE STILL PRICING IN LITTLE-TO-NO BAD NEWS

-0.28

-1.00

-0.50

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

BofA Merrill Lynch Global Financial Stress Index (GFSI) Historical Mean = 0.14

Percentile of Latest Reading = 24.2% Percentile of Reading During Our JUL 9th Q3 Macro Themes Call = 5.4%


SECTION III: PORTFOLIO STRATEGY

HEDGEYE 49


INVESTMENT CONCLUSIONS

• LONG: Long-term Treasuries (TLT)

• LONG: Muni Bonds (MUB)

• LONG: Healthcare (XLV)

• LONG: “Old China” (FXI)

• SHORT: Russell 2000 (IWM)

• SHORT: High-Yield Credit (JNK)

• SHORT: Homebuilders (ITB)

• SHORT: Regional Banks (KRE)

• SHORT: Retailers (XRT)

• SHORT: Eurozone (EZU)

• Domestic: Prepare for Quad #4 – Bonds over Stocks

– Defensives over Cyclicals

– Late-cycle over Early-Cycle

– Buy US Dollars/Sell Commodities

• International: European headwinds – Sell Europe as growth set to slow sustainably

– Buy China as policy stabilizes growth and reduces tail risk

– The monetary and fiscal policy vacuum should continue in Japan for at least another 3-4M

– Watch the USD carefully!

– #VolatilityAsymmetry?

KEY TAKEAWAYS: SPECIFIC RECOMMENDATIONS:

FOR MORE INFORMATION, CONTACT US AT:

[email protected] (203) 562-6500

PRESENTATION MAIN TITLEdocs.hedgeye.com/HE_GlobalFinancialMarkets_8.5.14.pdf · 2014-08-05 ·...

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