Thread by @tdarling1

🐻♉️↗️↘️↔️⚠️🚩🔺🔻🧮 💰

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

https://twitter.com/tdarling1/status/1619697250233634817?s=20&t=JtCqlTu9Sc72ckZUapcbbA

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!