The Zigmont Report (Daily Market Recap for 3/16/18)

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

Another quiet one.  The last session of the week was uneventful and the bulls got the official win.  After four down days for the S&P, it’ll seems reasonable to print a gain. Premarket action was flat and the tape zig-zagged a bit over the day but never went too far.  The high for the day was 14 handles over yesterday’s close.  That’s not exactly bullish zaniness.  It all looks like run-of-the-mill dip-buying to me.  With no significant catalyst influencing investors today, one can see whatever explanation you want to see.

We’re now knocking on the door of the FOMC decision on Wednesday.  The futures market is pricing a 100% probability of a 25 bip hike and the equity strategists are of the same opinion (86 of 90 surveyed on Bloomberg expect 25 bps, the other 4 expect no change).

The Fed may have a new Chair now but it is extremely unlikely that the Fed wants to abandon the clear signaling precedent it has established over the last handful of years.  The Fed has *not* surprised the street in a long time.  Chairman Powell isn’t about to kick off his era at the Fed with a ha-ha, I-fooled-you moment.

The only room for surprise on Wednesday will be the forward guidance and dot-plot.  Does the rest of the year hold 2 or 3 likely hikes?  What’s the room for interpretation from the statement?

There won’t be a press conference on Wednesday so the street will only have the statement to speculate over.  I think that actually bodes well for *less* volatility once the robots are done in the initial minute.  The Fed can scrutinize/control the language and keep investors from projecting too significantly.

All that action is going to commence Wednesday at 2 PM ET though.  Between now and then, it looks like we’re just waiting.

Have a great weekend, see you Monday,
-Mike