The Zigmont Report (Daily Market Recap for 3/14/18)

Mike Zigmont

Mike Zigmont, author of the Zigmont Report, is a partner at New York-based Harvest Volatility Management, a hedge fund with over $10B AUM, offering volatility management solutions to its investor base worldwide.  Mike has been publishing his daily newsletter (Monday-Friday) privately for the firm’s investors and his personal contacts in the investment business since 2008, sending it daily shortly after the market close.


The opinions expressed below are my own

Small changes.  Two days makes a pattern but it doesn’t make the pattern particularly strong.  The pattern was an up premarket, an up open, then a consistent fade over the session… all without much in the way of news.  Let’s just jump in.

The data today wasn’t earth-shattering but the important pieces were:

  1. Chinese industrial production surprised (7.2% vs 6.2% est & 6.6% prior)
  2. US PPI ex food and energy was a touch hot (0.4% vs 0.2% est & 0.4% prior)
  3. Atlanta Fed Q1 GDP estimate disappointed (1.9% vs 2.5% prior)

These data shouldn’t panic us and the market didn’t react strongly but it think there’s a net negative equity tilt here.  Sub 2% GDP isn’t helpful for equity valuations… the other data is arguable in both directions but economic growth must be robust to justify all the other assumptions priced into US equities.

To be fair, the Atlanta Fed’s estimates are pretty volatile so this number could bump up again in a week… but it is what it is right now and it was up at 5.4% on February 1st.  That’s a long drop.

So anyway, the point here is just that this is a splash of cold water on equity bullishness.  It didn’t catch headline attention but I think it’s an important fundamental to consider.  After the rally we’ve had, it’s not surprising for the tape to trade a little heavy.

Interestingly, treasury yields didn’t climb today.  For the equity market to really move, treasuries have to lead the way.  If equities are bouncing around more than usual (which they are), it’s just noise until we see treasuries move a lot.

See you tomorrow,
-Mike