🐻♉️↗️↘️↔️⚠️🚩🔺🔻🧮 💰
Macro Review 🧵
01/22/2023
1/9
Don’t you find it amazing how quickly the phrases “Transitory Goldilocks” and “Immaculate Disinflation” have entered the #macro vocabulary?
Where did they come from? Why?
2a/9
Let’s start with “Immaculate Disinflation”
Core #PCE rose .72% in Q4 2022 or +2.88% annualized.
The Fed has to be pleased with this, but given the pace of rate hikes, this is not all that surprising
Chart: Core #PCE
2b/9
Wages have also started to decelerated quickly - now +4.6% y/y
Chart: US average hourly earnings y/y
2c/9
With inflation running +2.88% and wages +4.6%, consumers have real wage gains and room to spend, as evidenced by GDP
3a/9
Economic growth in the US was a tale of two halves with negative GDP in the first half and accelerating growth in the second half
Chart: Real GDP ↗️ - don’t overthink it
3b/9
Growth ⬆️ inflation ⬇️ = Goldilocks 👱♀️
The “transient” part is that no one believes that Goldilocks can last.
For the time being, however, that’s the regime we have
4a/9
Supporting the view, high beta continued to thump low beta 16:1 in January (m)
$SPHB +4.77% (w) +16% (m)
$SPLV +0.33% (w) -1.0% (m)
Chart: $SPHB +15% (T) = Trend = 3 months and SUPER extended. Pull back cometh
4b/9
After a week of big tech earnings, growth is starting to give value a run for the money
$SPYG +2.74% (w) +5.76% (m)
$SPYV +2.27% (w) +6.48% (m)
Chart: $SPYG +1.38% (T) into a big week of late cap tech earnings 🍎
4c/9
And look at the big winners in sector space this week
$XLY +6.41% (w) +14.5% (m)
$XLC +4.12% (w) +15.2% (m)
$XLK +4.08% (w) +9.85% (m)
Folks these aren’t #quad4 exposures
Chart: $XLY ripping 🚀
You short $TSLA, bro 🤣
4d/9
And the losers - all #deflation #quad4 exposures
$XLV -0.78% (w) -2.2% (m)
$XLU -0.49% (w) -2.28% (m)
$XLP -0.33% (w) -2.2% (m)
Chart: $XLP now -0.42% (T)
4e/9
The dog of 2022 is outperforming both small caps +8.73% (m) and large caps +6.02% (m)
Chart: $COMPQ +4.32% (w) +11.04% (m)
4f/9
And just in case you have a 🤡 yelling #quad4 in your ear, tell ‘em that #Bitcoin doesn’t go 🚀🚀🚀 during a #deflation regime
Chart: $BTCUSD slicing through 23,000 🧈
5/9
Supporting this price appreciation, $VIX indicated at 1-year low with an 18 handle
6a/9
Speaking of vol, the MOVE index indicated at 6-month low - even though treasury ETFs were little changed on the week.
You know what they say, vol ⬇️ price ⬆️
Chart: MOVE 100
6b/9
A #quad1 exposure, convertibles ↗️
$CWB +1.52% (w) +6.19% (m)
7/9
A lot of equity bears are calling for the $USD to rise from the dead.
But wouldn’t you rather be long the Aussie? 🦘
Chart: $FXA +2.06% (w) +4.41% (m)
8a/9
In commodity space, metals are taking a breather.
$GOLD +0.6% (w) +5.65% (m)
$COPPER -0.7% (w) +10.76% (m)
$SILVER -1.3% (w) -1.75% (m)
Chart: $SILVER now 🐻 trade (t). No need to overstay your welcome here.
👁🗨 for weekly sell 🚨
8b/9
Hydrocarbons remain 🐻 (T)
$WTIC -2.4% (w) -0.72% (m)
$GASO -2.26% (w) +4.44% (m)
$NATGAS -10.1% (w) -36.24% (m)
Chart: $GASO +1.17% (T) with a weekly sell 🚨
8c/9
Green shoots 🌱 are starting to emerge in the ag space
$SUGAR +6.3% (w) +4.6% (m)
$WHEAT +1.15% (w) -5.3% (m)
$CORN +1.05% (w) +0.66% (m)
$SOYB +0.2% (w) +0.66% (m)
Chart: $DBA +2.37% (w) with a buy 🚨on the weekly
9/9
Into #FOMC we go with equities extended 👱♀️ and 4Q22 #ECI report due on Tuesday.
Expecting hawkish 25 bps 🔺 because the job ain’t done and Powell is resolute
A pullback in risk assets and bounce in the $USD should not come as a surprise.
Have a super profitable 💰 week!
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