Welcome to the deep dive. You sent us a couple
of really interesting sources today, and our
mission is basically to pull out the key insights
you need fast. Exactly. Get you up to speed without
you having to wade through everything yourself.
We've got a hedge eye market analysis from May
1st, 2025, and also a political and economic
briefing, same date, pulling from Electoral Vote
News and others. Yep. So we'll connect the dots
between market signals and, well, the bigger
picture stuff, politics, economics. Perfect for
you, our listener, if you like getting the info
efficiently, seeing different angles, but without
all the jargon. We're aiming for clarity. So
today we'll hit a potential global economic slowdown,
some pretty weird signals in the US markets,
and definitely some important political shifts
happening. Sounds good. Where should we start?
Maybe the slowdown. Yeah. Let's tackle that global
economic slowdown signal first. Hedgeye seems
pretty focused on it. They are. They're calling
it hashtag Quad Four. That's their term for slowing
growth happening alongside slowing inflation
or disinflation. OK. Hashtag Quad Four. Slow
growth, disinflation. Got it. They have data
backing this up, right? It's not just a feeling.
Oh, yeah. Definitely data driven. They point
to things like the CRB Commodities Index. It's
down, what, 7 % since February. That's significant.
Commodity, so raw materials, energy, that kind
of thing. Exactly. And crude oil specifically.
That's fallen 25 % from its high back in January.
That usually signals less demand globally, things
cooling off. OK. And wasn't there something about
China in the report too? Yes, good point. China's
PMI, the Purchasing Managers Index, basically
a health check for manufacturing it, actually
slipped below 50 in May. landed at 49 .0. And
below 50 means contraction, right? Shrinking
activity. Precisely. So another piece of evidence
pointing towards a global slowdown. Now, that
other source, the political briefing, I think
it mentioned economists worrying about a U .S.
recession, too. Does that tie in? It does tie
in. The Electoral Vote News piece mentions economists
predicting a potential recession. They link it
partly to President Trump's tariffs. And there
was even talk about possible negative GDP growth
for the U .S. in Q1. So market data and economic
forecasts are sort of aligning on this slowdown
idea. Seems that way. And Keith McCullough at
Hedgeye, he put it pretty bluntly. What did he
say? His quote was, the art of the deal on China
is to stay net short both China and commodities.
Basically, betting that prices for Chinese assets
and raw materials will fall shows strong conviction.
Wow. OK. So the takeaway is markets are already
adjusting. Yeah. Hedg I says markets are pricing
in slowing growth and disinflation. Investors
aren't waiting around. They're shifting strategy
now based on these signals. OK. But then. Things
get complicated with the US markets, right? Because
they're not entirely playing along with this
slowdown story. Not entirely, no. That's the
gaping divergence Hedgite talks about. It's really
interesting. You've got the bond market acting
one way and the stock market while acting another.
So break that down. What's the bond market doing?
Bond yields, especially the two -year treasury
yield, they've crashed to new lows for this cycle,
like really low. And low yields usually mean
investors are nervous, looking for safety, expecting
slower growth. Exactly. Classic. Hashtag Quad
Four signal. Money flowing into safer government
bonds pushes yields down. OK, so bonds say caution,
but stocks. The S &P 500. Well, that's the divergence.
The S &P 500 actually broke above a key resistance
level, 5562, and Hedgeye's even eyeing the next
potential resistance higher up, around 5693.
So stocks seem more optimistic, or at least less
worried than bonds. That's confusing. It is confusing,
and it means you have to be tactical. Hedger's
response shows that they're actually trimming
some winners. Trimming, selling off profitable
positions. Yeah, some of their long positions,
things they expected to go up, like treasury
bond ETFs, TUA, a volatility product, IVL, a
fund called CLOX. Maybe they think the easy money's
been made there, given the conflicting signals.
But they're not just selling, they're buying
some things, too. Right, selectively. They're
adding longs in areas they think might do OK,
even if growth slows, things like consumer staples,
XLP, and interestingly, some international markets.
like India, INDA, and Argentina, ARGT, plus a
specific stock, Celsius, CELH. And they're adjusting
their shorts, too. Bets against stocks. Yep.
Covered some shorts, meaning they closed out
bets against stocks like Meta, the regional banks,
KRE, ELF Cosmetics. Looks like they felt those
trades had run their course for now. But they
didn't cover everything. Still short meta in
Google. Right. They mentioned staying short meta
in Gujial, because those are near the top of
their calculated risk range, basically, their
expected trading band. So potentially overvalued
in the short term. But not Microsoft. They cover
that short. Yeah. MSFT showed what they called
a bullish trend breakout at $395. Their signal
suggested strong upward momentum there. So being
short didn't make sense anymore according to
their process. This really highlights their approach,
doesn't it? This whole signal -driven thing.
And they mentioned something philosophical. Negative
capability. Ah, yeah. From the poet Keats. Sounds
a bit highbrow for finance, maybe. Maybe. But
what's the idea? It's about being okay with uncertainty.
Not needing to have all the answers right now.
Not jumping to conclusions. Just observing. Staying
flexible. Given the market divergence, you can
see why that mindset would be helpful. Resisting
the urge to force a simple narrative when things
are messy. Exactly. And they also mentioned Robert
Green's idea of the original mind from his book,
Mastery. OK, what's that one? It's similar, about
staying curious, open minded, always learning
like you did when you were a kid, not getting
locked into rigid beliefs, constantly adapting
based on your information. So less about predicting,
more about reacting to the data, the signal.
That's the core of it. Their process is built
around Rate of change are things accelerating
or decelerating, and they look at trading volume
to confirm those shifts. Is the market activity
backing up the trend? Got it. And there was that
mention of front -running information. What was
that about? Well, it's a bit subtle, but the
idea is that by analyzing these signals really
closely, maybe they can spot shifts before the
news breaks or becomes common knowledge, get
ahead of the curve, so to speak. Potential edge
from deep analysis. Potentially. But they're
also careful to say, look, this is our portfolio
strategy. Right. Not advice for everyone. You
need to consider your own situation. Absolutely.
Your own risk tolerance, your goals, all that.
OK, let's switch gears to the political side
now based on that news briefing we touched on.
Trumponomics and the recession fears. Yeah, the
briefing really digs into those potential contradictions.
Like, tariffs are meant to help manufacturing,
right? Supposedly. But they can also raise costs
for everyone, hurt consumers, maybe even slow
down the economy they're trying to boost. And
then there's the national debt angle. It gets
complicated. Definitely seems like internal tensions
there. What else stood out politically? There
was something about a House bill. Uh -huh. A
bill aimed at expanding the president's power
over how federal agencies work. That obviously
raises big questions about, you know, checks
and balances, executive authority. Significant
potential impact on how government functions.
Could be. And then there was a legal item, a
federal judge stepping in regarding a Columbia
University student arrested by ICE. Right. That
touches on immigration, due process, ongoing
complex issues. Very much so. Underlying a lot
of this, the briefing notes the really deep partisan
divide. Yeah, that wasn't exactly news, but it's
a crucial backdrop, isn't it? It affects pretty
much everything. Absolutely. It makes finding
common ground or passing legislation incredibly
difficult. Now, staying with the political theme,
but shifting slightly, that briefing had some
interesting poll data about Gen Z from Yale,
I think. Yes, the Yale youth poll. And what's
fascinating is the difference within Gen Z. How
so? Well, it looks like the younger group, say,
18 to 21 year olds, they show less support for
Donald Trump compared to the slightly older ones,
the 22 to 29 year olds. Less Trump support among
the youngest voters. Yeah. And more support for
Democrats in that younger group. That's what
the poll suggests. Yeah. And the thinking is
their formative experiences are different. Makes
sense. The 1821 group. really came of age politically
during Trump's presidency and the whole COVID
pandemic upheaval. Right. Different context than
those who are already in their late teens or
early 20s before all that. Think about things
like TikTok's rise, the post -COVID economy.
It shapes views differently. Interesting generational
nuances there. OK, what else? Oh, the IRS and
Harvard's tax exemption. That sounded potentially
explosive. It's definitely a significant point.
The idea that the IRS might investigate Harvard's
tax exempt status. Well, it opens up a whole
can of worms about these big, wealthy universities.
Questions about their endowments, admissions,
whether they're really serving a broad public
good enough to justify the tax break. Exactly.
There are strong arguments on both sides, and
it's been a debate for a while, but this brings
it to the forefront. Any change there could seriously
impact how these elite institutions operate financially.
A fundamental challenge, potentially. And linked
to that, sort of, was the data on trust in media.
Yeah, specifically looking at trust levels among
Trump supporters. The numbers are, well, pretty
stark. Low trust in outlets like MSNBC, CNN,
New York Times and PR. Very low, according to
this polling. But then you see much higher trust
in, say, Fox News and also specific social media
figures. It highlights that whole net trust idea
that I mentioned, the difference between strong
trust and strong distrust really shows the polarization.
Absolutely. It paints a picture of very separate
inflation ecosystems. People aren't just disagreeing
on issues. They're often operating from completely
different sets of perceived facts based on where
they get their news. And figures like Elon Musk,
his role with ex Twitter, that influences perceptions
too. Seems likely, yeah. His actions and commentary
definitely play into how different media sources
are viewed within certain groups. It's all part
of this fragmented landscape. OK, one last piece
in the briefing. Harvard sending a letter about
Trump's tax returns. We're connecting that to
the administration wanting more control over
universities. Yeah, that was an interesting juxtaposition.
It hints at potential friction, maybe even pressure,
between the administration and places like Harvard.
And the mention of the Civil Rights Act of 1964
in relation to tax exemptions. Right. It suggests
the potential angle the administration might
explore linking non -discrimination rules to
an institution's tax -exempt status. It adds
another layer of complexity to that whole Harvard
-Iris situation. So putting it all together,
then, quite a complex picture. Definitely. You've
got clear signs pointing to an economic slowdown
globally based on data like commodities and China's
PMI. But the US markets are sending mixed signals
with bonds looking worried while stocks are surprisingly
resilient, leading to very tactical adjustments.
And layered on top of all that economic uncertainty,
you have these significant political currents,
deep partisanship. questions about executive
power, generational shifts in voting patterns.
Not to mention debates over university tax status
and these really fractured levels of media trust.
Exactly. It shows how interconnected everything
is. You can't really understand the market without
looking at the politics and vice versa. Seeing
these threads connect gives you that richer,
more complete view of what's actually going on.
For sure. And maybe something to chew on. As
we watch these economic headwinds potentially
pick up, how might that interact with the political
divisions we see? Could it make them worse? Or
maybe, maybe shift them in unexpected ways. That's
a really good question to keep in mind as things
develop. Lots to watch.