Bear Market Phase 3 - #Quad4 Profit Recession Reiterated
Hedgeye
Wed 10 May 2023 - 16:00 BST / 11:00 EDT
Summary
On the call with Hedgeye founder, Keith McCullough, he reiterated the profit recession recession call with earnings down 10% year-over-year in Q1 for the NASDAQ. Keith calls poppycock on Wall Street & Powell’s soft landing expectations with Hedgeye seeing a big downward surprise in Q1 headline GDP coming: -2.25%.
We’re in phase three of the bear market, but only phase one of the credit event Big downward moves in Public equities shouldn’t be a surprise but Hedgeye also see multiple bodies surfacing in Private Equity. Keith reiterated Long gold and precious metals.
The top two ranked assets in the model are duration or fixed income with a top long being the ten-year treasury note, the biggest net position in US history. The crowd has to cover their shorts.
From a sector perspective, Hedgeye see long consumer staples, utilities and healthcare as the play currently. They see commodities, high yield credit and junk as short opportunities here.
Japanese equities are currently Hedgeye’s favorite non-US quad four play, they're printing money every day, where most countries are tightening. Japan is going to go from 0.2% growth to 1.3% growth.
Topics
Quad4 Profit Recession Reiterated - New Quarter, same trend as the slowest moving Quad4 wreck in modernity continues to solider southward. Lost pricing power tighter credit, contracting liquidity, negative real income growth, deteriorating real discretionary consumption capacity and rolling credit events continue to define the local (& global) macro trajectory, and the trajectory of the domestic profit cycle by extension. Keith will detail the fragility and trap door risk associated with the progressive hollowing out of underlying conditions and update the outlook and risk management playbook as phase III of the bear market remains in conspicuous motion
Quad4 Credit Event Reiterated - The pressure in the system has reached a critical threshold. Bank runs triggered by long-duration assets funded with fickle, uninsured liabilities are simply the latest symptomn. The next phase of the credit cycle will reflect further tightening in credit availability and deteriorating quality at both the household and commercial level
Long Gold Reiterated - Any port in a storm? How about the port trifecta or Gold, $USD, Duration. While most commodity prices have collapsed under demand destruction, gold has not lost value and pushed steadily higher. The full economic fallout of policy mismanagement is yet to play out and not only is Gold a port in the storm but investors know the policy reaction function down the road will be to print
