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
Tariffs (again). So the last few days of optimism were doused today. The trade war heated up last night and equities reacted negatively. To be fair to the bulls, the S&P only pulled back to Monday morning’s levels… so it’s not like the world is falling apart. Capital flow was surprisingly light again today at 92%.
Despite today’s drop, the market continues to discount the trade war oh so gently. Investors have near-zero concern about the worsening rhetoric. Just what needs to happen for the attitude of the market to change?
The bears are jumping up and down about the lunacy of these valuations on the cusp of a trade war. They are likely overstating their case but we don’t need a recession for them to be right… if we get a flattening of economic growth, the earnings and sales growth are going to disappoint across the board.
I may not be jumping up and down but I share the bears concerns. There are times to be optimistic (extreme gloom in the market) and times to be pessimistic (extreme optimism in the market). Now is probably the time to be realistic.
Are current growth expectations appropriate?
I obviously don’t have the indisputable answer but my gut says the events of the last few weeks merit an adjustment down of valuations. The market disagrees.
I can’t/won’t fight the market but I think the current of the psychology of the US equity market is leaning too far in the optimistic direction.
We’ll see whether the market begins adjusting with this latest tariff headline or if it will take another big event/headline.
See you tomorrow,