WEBVTT 00:00:00.000 --> 00:00:01.820 Welcome to the deep dive. You sent us a couple 00:00:01.820 --> 00:00:04.980 of really interesting sources today, and our 00:00:04.980 --> 00:00:07.120 mission is basically to pull out the key insights 00:00:07.120 --> 00:00:10.640 you need fast. Exactly. Get you up to speed without 00:00:10.640 --> 00:00:12.359 you having to wade through everything yourself. 00:00:12.500 --> 00:00:15.599 We've got a hedge eye market analysis from May 00:00:15.599 --> 00:00:19.780 1st, 2025, and also a political and economic 00:00:19.780 --> 00:00:22.420 briefing, same date, pulling from Electoral Vote 00:00:22.420 --> 00:00:25.739 News and others. Yep. So we'll connect the dots 00:00:25.739 --> 00:00:28.929 between market signals and, well, the bigger 00:00:28.929 --> 00:00:31.410 picture stuff, politics, economics. Perfect for 00:00:31.410 --> 00:00:33.289 you, our listener, if you like getting the info 00:00:33.289 --> 00:00:36.229 efficiently, seeing different angles, but without 00:00:36.229 --> 00:00:38.890 all the jargon. We're aiming for clarity. So 00:00:38.890 --> 00:00:42.210 today we'll hit a potential global economic slowdown, 00:00:43.009 --> 00:00:45.590 some pretty weird signals in the US markets, 00:00:45.670 --> 00:00:47.929 and definitely some important political shifts 00:00:47.929 --> 00:00:50.090 happening. Sounds good. Where should we start? 00:00:50.149 --> 00:00:52.590 Maybe the slowdown. Yeah. Let's tackle that global 00:00:52.590 --> 00:00:55.210 economic slowdown signal first. Hedgeye seems 00:00:55.210 --> 00:00:57.030 pretty focused on it. They are. They're calling 00:00:57.030 --> 00:01:00.390 it hashtag Quad Four. That's their term for slowing 00:01:00.390 --> 00:01:02.829 growth happening alongside slowing inflation 00:01:02.829 --> 00:01:06.349 or disinflation. OK. Hashtag Quad Four. Slow 00:01:06.349 --> 00:01:09.450 growth, disinflation. Got it. They have data 00:01:09.450 --> 00:01:11.030 backing this up, right? It's not just a feeling. 00:01:11.090 --> 00:01:13.290 Oh, yeah. Definitely data driven. They point 00:01:13.290 --> 00:01:15.709 to things like the CRB Commodities Index. It's 00:01:15.709 --> 00:01:19.269 down, what, 7 % since February. That's significant. 00:01:19.409 --> 00:01:21.909 Commodity, so raw materials, energy, that kind 00:01:21.909 --> 00:01:24.189 of thing. Exactly. And crude oil specifically. 00:01:24.370 --> 00:01:27.329 That's fallen 25 % from its high back in January. 00:01:27.870 --> 00:01:31.469 That usually signals less demand globally, things 00:01:31.469 --> 00:01:34.030 cooling off. OK. And wasn't there something about 00:01:34.030 --> 00:01:36.810 China in the report too? Yes, good point. China's 00:01:36.810 --> 00:01:39.430 PMI, the Purchasing Managers Index, basically 00:01:39.430 --> 00:01:41.790 a health check for manufacturing it, actually 00:01:41.790 --> 00:01:45.549 slipped below 50 in May. landed at 49 .0. And 00:01:45.549 --> 00:01:47.510 below 50 means contraction, right? Shrinking 00:01:47.510 --> 00:01:50.150 activity. Precisely. So another piece of evidence 00:01:50.150 --> 00:01:52.680 pointing towards a global slowdown. Now, that 00:01:52.680 --> 00:01:54.840 other source, the political briefing, I think 00:01:54.840 --> 00:01:56.900 it mentioned economists worrying about a U .S. 00:01:57.000 --> 00:01:59.040 recession, too. Does that tie in? It does tie 00:01:59.040 --> 00:02:01.459 in. The Electoral Vote News piece mentions economists 00:02:01.459 --> 00:02:04.260 predicting a potential recession. They link it 00:02:04.260 --> 00:02:06.079 partly to President Trump's tariffs. And there 00:02:06.079 --> 00:02:08.379 was even talk about possible negative GDP growth 00:02:08.379 --> 00:02:11.479 for the U .S. in Q1. So market data and economic 00:02:11.479 --> 00:02:14.500 forecasts are sort of aligning on this slowdown 00:02:14.500 --> 00:02:17.000 idea. Seems that way. And Keith McCullough at 00:02:17.000 --> 00:02:18.979 Hedgeye, he put it pretty bluntly. What did he 00:02:18.979 --> 00:02:22.310 say? His quote was, the art of the deal on China 00:02:22.310 --> 00:02:25.710 is to stay net short both China and commodities. 00:02:26.590 --> 00:02:29.150 Basically, betting that prices for Chinese assets 00:02:29.150 --> 00:02:32.590 and raw materials will fall shows strong conviction. 00:02:32.789 --> 00:02:35.949 Wow. OK. So the takeaway is markets are already 00:02:35.949 --> 00:02:38.490 adjusting. Yeah. Hedg I says markets are pricing 00:02:38.490 --> 00:02:41.110 in slowing growth and disinflation. Investors 00:02:41.110 --> 00:02:42.909 aren't waiting around. They're shifting strategy 00:02:42.909 --> 00:02:46.370 now based on these signals. OK. But then. Things 00:02:46.370 --> 00:02:48.789 get complicated with the US markets, right? Because 00:02:48.789 --> 00:02:51.150 they're not entirely playing along with this 00:02:51.150 --> 00:02:53.490 slowdown story. Not entirely, no. That's the 00:02:53.490 --> 00:02:55.669 gaping divergence Hedgite talks about. It's really 00:02:55.669 --> 00:02:56.990 interesting. You've got the bond market acting 00:02:56.990 --> 00:02:59.789 one way and the stock market while acting another. 00:02:59.930 --> 00:03:01.990 So break that down. What's the bond market doing? 00:03:02.449 --> 00:03:04.490 Bond yields, especially the two -year treasury 00:03:04.490 --> 00:03:08.409 yield, they've crashed to new lows for this cycle, 00:03:08.449 --> 00:03:10.990 like really low. And low yields usually mean 00:03:10.990 --> 00:03:14.349 investors are nervous, looking for safety, expecting 00:03:14.349 --> 00:03:17.569 slower growth. Exactly. Classic. Hashtag Quad 00:03:17.569 --> 00:03:20.409 Four signal. Money flowing into safer government 00:03:20.409 --> 00:03:23.849 bonds pushes yields down. OK, so bonds say caution, 00:03:24.330 --> 00:03:27.490 but stocks. The S &P 500. Well, that's the divergence. 00:03:27.789 --> 00:03:30.710 The S &P 500 actually broke above a key resistance 00:03:30.710 --> 00:03:34.150 level, 5562, and Hedgeye's even eyeing the next 00:03:34.150 --> 00:03:37.150 potential resistance higher up, around 5693. 00:03:37.569 --> 00:03:41.250 So stocks seem more optimistic, or at least less 00:03:41.250 --> 00:03:44.000 worried than bonds. That's confusing. It is confusing, 00:03:44.099 --> 00:03:46.050 and it means you have to be tactical. Hedger's 00:03:46.050 --> 00:03:47.849 response shows that they're actually trimming 00:03:47.849 --> 00:03:50.069 some winners. Trimming, selling off profitable 00:03:50.069 --> 00:03:52.090 positions. Yeah, some of their long positions, 00:03:52.169 --> 00:03:54.629 things they expected to go up, like treasury 00:03:54.629 --> 00:03:58.349 bond ETFs, TUA, a volatility product, IVL, a 00:03:58.349 --> 00:04:01.090 fund called CLOX. Maybe they think the easy money's 00:04:01.090 --> 00:04:03.169 been made there, given the conflicting signals. 00:04:03.250 --> 00:04:04.830 But they're not just selling, they're buying 00:04:04.830 --> 00:04:06.990 some things, too. Right, selectively. They're 00:04:06.990 --> 00:04:09.289 adding longs in areas they think might do OK, 00:04:09.349 --> 00:04:12.090 even if growth slows, things like consumer staples, 00:04:12.110 --> 00:04:15.069 XLP, and interestingly, some international markets. 00:04:14.889 --> 00:04:19.550 like India, INDA, and Argentina, ARGT, plus a 00:04:19.550 --> 00:04:23.310 specific stock, Celsius, CELH. And they're adjusting 00:04:23.310 --> 00:04:25.889 their shorts, too. Bets against stocks. Yep. 00:04:26.310 --> 00:04:28.430 Covered some shorts, meaning they closed out 00:04:28.430 --> 00:04:30.870 bets against stocks like Meta, the regional banks, 00:04:31.129 --> 00:04:34.629 KRE, ELF Cosmetics. Looks like they felt those 00:04:34.629 --> 00:04:36.829 trades had run their course for now. But they 00:04:36.829 --> 00:04:39.569 didn't cover everything. Still short meta in 00:04:39.569 --> 00:04:42.170 Google. Right. They mentioned staying short meta 00:04:42.170 --> 00:04:44.149 in Gujial, because those are near the top of 00:04:44.149 --> 00:04:46.689 their calculated risk range, basically, their 00:04:46.689 --> 00:04:50.129 expected trading band. So potentially overvalued 00:04:50.129 --> 00:04:52.350 in the short term. But not Microsoft. They cover 00:04:52.350 --> 00:04:54.930 that short. Yeah. MSFT showed what they called 00:04:54.930 --> 00:04:59.689 a bullish trend breakout at $395. Their signal 00:04:59.689 --> 00:05:02.089 suggested strong upward momentum there. So being 00:05:02.089 --> 00:05:03.730 short didn't make sense anymore according to 00:05:03.730 --> 00:05:06.149 their process. This really highlights their approach, 00:05:06.250 --> 00:05:08.040 doesn't it? This whole signal -driven thing. 00:05:08.319 --> 00:05:11.220 And they mentioned something philosophical. Negative 00:05:11.220 --> 00:05:14.560 capability. Ah, yeah. From the poet Keats. Sounds 00:05:14.560 --> 00:05:17.120 a bit highbrow for finance, maybe. Maybe. But 00:05:17.120 --> 00:05:20.240 what's the idea? It's about being okay with uncertainty. 00:05:20.920 --> 00:05:22.939 Not needing to have all the answers right now. 00:05:23.079 --> 00:05:26.240 Not jumping to conclusions. Just observing. Staying 00:05:26.240 --> 00:05:28.860 flexible. Given the market divergence, you can 00:05:28.860 --> 00:05:31.370 see why that mindset would be helpful. Resisting 00:05:31.370 --> 00:05:33.649 the urge to force a simple narrative when things 00:05:33.649 --> 00:05:36.110 are messy. Exactly. And they also mentioned Robert 00:05:36.110 --> 00:05:39.069 Green's idea of the original mind from his book, 00:05:39.350 --> 00:05:41.910 Mastery. OK, what's that one? It's similar, about 00:05:41.910 --> 00:05:44.730 staying curious, open minded, always learning 00:05:44.730 --> 00:05:47.350 like you did when you were a kid, not getting 00:05:47.350 --> 00:05:50.370 locked into rigid beliefs, constantly adapting 00:05:50.370 --> 00:05:53.129 based on your information. So less about predicting, 00:05:53.689 --> 00:05:55.910 more about reacting to the data, the signal. 00:05:56.009 --> 00:05:58.449 That's the core of it. Their process is built 00:05:58.449 --> 00:06:01.569 around Rate of change are things accelerating 00:06:01.569 --> 00:06:04.790 or decelerating, and they look at trading volume 00:06:04.790 --> 00:06:08.129 to confirm those shifts. Is the market activity 00:06:08.129 --> 00:06:10.850 backing up the trend? Got it. And there was that 00:06:10.850 --> 00:06:12.850 mention of front -running information. What was 00:06:12.850 --> 00:06:15.769 that about? Well, it's a bit subtle, but the 00:06:15.769 --> 00:06:18.389 idea is that by analyzing these signals really 00:06:18.389 --> 00:06:21.129 closely, maybe they can spot shifts before the 00:06:21.129 --> 00:06:23.589 news breaks or becomes common knowledge, get 00:06:23.589 --> 00:06:25.990 ahead of the curve, so to speak. Potential edge 00:06:25.990 --> 00:06:28.839 from deep analysis. Potentially. But they're 00:06:28.839 --> 00:06:30.920 also careful to say, look, this is our portfolio 00:06:30.920 --> 00:06:33.439 strategy. Right. Not advice for everyone. You 00:06:33.439 --> 00:06:35.800 need to consider your own situation. Absolutely. 00:06:35.899 --> 00:06:37.920 Your own risk tolerance, your goals, all that. 00:06:38.160 --> 00:06:41.160 OK, let's switch gears to the political side 00:06:41.160 --> 00:06:43.720 now based on that news briefing we touched on. 00:06:45.080 --> 00:06:47.480 Trumponomics and the recession fears. Yeah, the 00:06:47.480 --> 00:06:50.160 briefing really digs into those potential contradictions. 00:06:50.639 --> 00:06:52.399 Like, tariffs are meant to help manufacturing, 00:06:52.740 --> 00:06:55.120 right? Supposedly. But they can also raise costs 00:06:55.120 --> 00:06:58.120 for everyone, hurt consumers, maybe even slow 00:06:58.120 --> 00:07:00.379 down the economy they're trying to boost. And 00:07:00.379 --> 00:07:02.759 then there's the national debt angle. It gets 00:07:02.759 --> 00:07:05.120 complicated. Definitely seems like internal tensions 00:07:05.120 --> 00:07:06.899 there. What else stood out politically? There 00:07:06.899 --> 00:07:09.720 was something about a House bill. Uh -huh. A 00:07:09.720 --> 00:07:12.139 bill aimed at expanding the president's power 00:07:12.139 --> 00:07:14.319 over how federal agencies work. That obviously 00:07:14.319 --> 00:07:16.439 raises big questions about, you know, checks 00:07:16.439 --> 00:07:19.160 and balances, executive authority. Significant 00:07:19.160 --> 00:07:21.040 potential impact on how government functions. 00:07:21.199 --> 00:07:23.720 Could be. And then there was a legal item, a 00:07:23.720 --> 00:07:25.920 federal judge stepping in regarding a Columbia 00:07:25.920 --> 00:07:28.740 University student arrested by ICE. Right. That 00:07:28.740 --> 00:07:32.800 touches on immigration, due process, ongoing 00:07:32.800 --> 00:07:36.290 complex issues. Very much so. Underlying a lot 00:07:36.290 --> 00:07:39.589 of this, the briefing notes the really deep partisan 00:07:39.589 --> 00:07:42.329 divide. Yeah, that wasn't exactly news, but it's 00:07:42.329 --> 00:07:44.410 a crucial backdrop, isn't it? It affects pretty 00:07:44.410 --> 00:07:46.670 much everything. Absolutely. It makes finding 00:07:46.670 --> 00:07:49.129 common ground or passing legislation incredibly 00:07:49.129 --> 00:07:51.930 difficult. Now, staying with the political theme, 00:07:52.170 --> 00:07:54.850 but shifting slightly, that briefing had some 00:07:54.850 --> 00:07:57.850 interesting poll data about Gen Z from Yale, 00:07:57.990 --> 00:08:00.850 I think. Yes, the Yale youth poll. And what's 00:08:00.850 --> 00:08:03.149 fascinating is the difference within Gen Z. How 00:08:03.149 --> 00:08:05.750 so? Well, it looks like the younger group, say, 00:08:05.990 --> 00:08:09.009 18 to 21 year olds, they show less support for 00:08:09.009 --> 00:08:12.170 Donald Trump compared to the slightly older ones, 00:08:12.410 --> 00:08:14.870 the 22 to 29 year olds. Less Trump support among 00:08:14.870 --> 00:08:17.470 the youngest voters. Yeah. And more support for 00:08:17.470 --> 00:08:19.209 Democrats in that younger group. That's what 00:08:19.209 --> 00:08:21.889 the poll suggests. Yeah. And the thinking is 00:08:21.889 --> 00:08:24.209 their formative experiences are different. Makes 00:08:24.209 --> 00:08:27.680 sense. The 1821 group. really came of age politically 00:08:27.680 --> 00:08:30.220 during Trump's presidency and the whole COVID 00:08:30.220 --> 00:08:32.700 pandemic upheaval. Right. Different context than 00:08:32.700 --> 00:08:34.220 those who are already in their late teens or 00:08:34.220 --> 00:08:36.360 early 20s before all that. Think about things 00:08:36.360 --> 00:08:39.460 like TikTok's rise, the post -COVID economy. 00:08:39.899 --> 00:08:42.519 It shapes views differently. Interesting generational 00:08:42.519 --> 00:08:45.620 nuances there. OK, what else? Oh, the IRS and 00:08:45.620 --> 00:08:48.679 Harvard's tax exemption. That sounded potentially 00:08:48.679 --> 00:08:50.980 explosive. It's definitely a significant point. 00:08:51.159 --> 00:08:54.159 The idea that the IRS might investigate Harvard's 00:08:54.159 --> 00:08:57.370 tax exempt status. Well, it opens up a whole 00:08:57.370 --> 00:09:00.429 can of worms about these big, wealthy universities. 00:09:00.649 --> 00:09:02.549 Questions about their endowments, admissions, 00:09:02.730 --> 00:09:05.029 whether they're really serving a broad public 00:09:05.029 --> 00:09:07.370 good enough to justify the tax break. Exactly. 00:09:07.789 --> 00:09:09.710 There are strong arguments on both sides, and 00:09:09.710 --> 00:09:11.789 it's been a debate for a while, but this brings 00:09:11.789 --> 00:09:15.350 it to the forefront. Any change there could seriously 00:09:15.350 --> 00:09:18.450 impact how these elite institutions operate financially. 00:09:18.730 --> 00:09:21.049 A fundamental challenge, potentially. And linked 00:09:21.049 --> 00:09:24.490 to that, sort of, was the data on trust in media. 00:09:24.649 --> 00:09:27.210 Yeah, specifically looking at trust levels among 00:09:27.210 --> 00:09:30.629 Trump supporters. The numbers are, well, pretty 00:09:30.629 --> 00:09:33.830 stark. Low trust in outlets like MSNBC, CNN, 00:09:34.129 --> 00:09:36.570 New York Times and PR. Very low, according to 00:09:36.570 --> 00:09:38.610 this polling. But then you see much higher trust 00:09:38.610 --> 00:09:41.990 in, say, Fox News and also specific social media 00:09:41.990 --> 00:09:44.230 figures. It highlights that whole net trust idea 00:09:44.230 --> 00:09:45.629 that I mentioned, the difference between strong 00:09:45.629 --> 00:09:48.629 trust and strong distrust really shows the polarization. 00:09:48.830 --> 00:09:51.710 Absolutely. It paints a picture of very separate 00:09:51.710 --> 00:09:54.649 inflation ecosystems. People aren't just disagreeing 00:09:54.649 --> 00:09:56.730 on issues. They're often operating from completely 00:09:56.730 --> 00:09:59.409 different sets of perceived facts based on where 00:09:59.409 --> 00:10:01.970 they get their news. And figures like Elon Musk, 00:10:02.490 --> 00:10:05.889 his role with ex Twitter, that influences perceptions 00:10:05.889 --> 00:10:08.710 too. Seems likely, yeah. His actions and commentary 00:10:08.710 --> 00:10:10.909 definitely play into how different media sources 00:10:10.909 --> 00:10:12.809 are viewed within certain groups. It's all part 00:10:12.809 --> 00:10:15.289 of this fragmented landscape. OK, one last piece 00:10:15.289 --> 00:10:18.610 in the briefing. Harvard sending a letter about 00:10:18.610 --> 00:10:21.070 Trump's tax returns. We're connecting that to 00:10:21.070 --> 00:10:23.330 the administration wanting more control over 00:10:23.330 --> 00:10:26.269 universities. Yeah, that was an interesting juxtaposition. 00:10:26.649 --> 00:10:30.029 It hints at potential friction, maybe even pressure, 00:10:30.330 --> 00:10:32.409 between the administration and places like Harvard. 00:10:32.470 --> 00:10:34.990 And the mention of the Civil Rights Act of 1964 00:10:34.990 --> 00:10:38.049 in relation to tax exemptions. Right. It suggests 00:10:38.049 --> 00:10:39.970 the potential angle the administration might 00:10:39.970 --> 00:10:42.549 explore linking non -discrimination rules to 00:10:42.549 --> 00:10:45.629 an institution's tax -exempt status. It adds 00:10:45.629 --> 00:10:47.950 another layer of complexity to that whole Harvard 00:10:47.950 --> 00:10:50.210 -Iris situation. So putting it all together, 00:10:50.509 --> 00:10:53.590 then, quite a complex picture. Definitely. You've 00:10:53.590 --> 00:10:56.330 got clear signs pointing to an economic slowdown 00:10:56.330 --> 00:10:59.590 globally based on data like commodities and China's 00:10:59.590 --> 00:11:02.830 PMI. But the US markets are sending mixed signals 00:11:02.830 --> 00:11:07.809 with bonds looking worried while stocks are surprisingly 00:11:07.809 --> 00:11:10.429 resilient, leading to very tactical adjustments. 00:11:10.929 --> 00:11:13.090 And layered on top of all that economic uncertainty, 00:11:13.090 --> 00:11:16.309 you have these significant political currents, 00:11:17.289 --> 00:11:19.860 deep partisanship. questions about executive 00:11:19.860 --> 00:11:23.240 power, generational shifts in voting patterns. 00:11:23.360 --> 00:11:25.779 Not to mention debates over university tax status 00:11:25.779 --> 00:11:28.980 and these really fractured levels of media trust. 00:11:29.360 --> 00:11:31.700 Exactly. It shows how interconnected everything 00:11:31.700 --> 00:11:33.820 is. You can't really understand the market without 00:11:33.820 --> 00:11:36.139 looking at the politics and vice versa. Seeing 00:11:36.139 --> 00:11:38.340 these threads connect gives you that richer, 00:11:38.340 --> 00:11:40.320 more complete view of what's actually going on. 00:11:40.419 --> 00:11:43.509 For sure. And maybe something to chew on. As 00:11:43.509 --> 00:11:45.610 we watch these economic headwinds potentially 00:11:45.610 --> 00:11:48.090 pick up, how might that interact with the political 00:11:48.090 --> 00:11:50.690 divisions we see? Could it make them worse? Or 00:11:50.690 --> 00:11:54.610 maybe, maybe shift them in unexpected ways. That's 00:11:54.610 --> 00:11:56.029 a really good question to keep in mind as things 00:11:56.029 --> 00:11:57.210 develop. Lots to watch.