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
Even more trade worries. Trump threatened more tariffs last night and China announced a retaliation and overseas markets dropped significantly. China’s market fell 3.5%. Our S&P futures were off 30 handles before the open and it looked like the trade war chickens were coming home to roost.
The US equity market never broke and bottomed around 10:30 AM. Buyers repaired most of the damage by the afternoon and we finished down a modest amount.
We knew this already but today is proof positive that US equity buyers are optimistic. The trade rhetoric is worsening as we speak and they are jumping in to the fray as if all the trade threats are empty.
Maybe they are right. I don’t want to dismiss the fact that it is possible that all these tariff threats never come into material existence.
Maybe they are wrong however! I don’t know how much we should be handicapping the implementation of trade frictions but it doesn’t seem reasonable, to me, to heavily weight the benign economic outcomes and to essentially dismiss the negative ones.
What is it that the equity bulls see? What am I missing? Valuation isn’t on their side. The Fed isn’t on their side. The trade landscape isn’t on their side.
The only thing on their side is the last 9 years of momentum.
That’s not compelling to me but maybe that’s good enough for a lot of investors. Reminds me of an old stockbroker joke about a broker who’s buying a stock again and again, day after day….and his buddy can’t understand it and finally asks him why?
“Because it’s going up.”
Anyway, the dip-buyers and permabulls are back in a big way. They took a break in the spring but for some reason they think that now is the time for them to re-engage US equities.
I think they’re pressing a bad bet but maybe they end up winning again regardless.
See you tomorrow,