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 shortly after the market close.
The opinions expressed below are my own and do not necessarily represent those of Harvest Volatility Management, LLC
New highs, no surprise. Equities crawled higher slowly over the course of the day and finished with a respectable gain. Capital flow was light again at 91% but that’s been pretty typical for most rallies this year. Modest up-sessions on light volumes was the recipe for this year’s bull market. It continues.
Earnings are coming at a rapid clip and so far so good. Most stocks are surprising positively and the narrative for the season is sanguine. It’s a stretch to say that the narrative for the season is set in stone but, if you’re a betting person, it’s pretty much in the bag. This is going to be a “great” earnings season when it’s all said and done and, more importantly, it will be used to justify more bullishness.
The valuation bears (of which, I am one) have to let it go. The sentiment of the market is unassailable.
And that’s the most important takeaway from today/this week:
Fundamentals don’t matter while the optimism is strong *and
* the optimism is plausible (not necessarily likely or reasonable).That last part is key. The dot-com bubble persisted for years because the high growth rates kept showing up…and they were used for crazier subsequent extrapolations.
That is where we are today. The optimism isn’t as delusional now but it is essentially the same. The optimistic projections are for double-digit earnings growth and 5-ish percent revenue growth and the latest results *preserve
* that projection.Sentiment won’t change until those projections are dashed all to pieces. And that will only happen once a monumental change occurs.
That change could be a large exogenous macro event, e.g. ’08 financial crisis, or an eventual evaporation of earnings & revenue growth, e.g. ’00 dot-com bubble bust.
The bull is running. It’s not justifiable (from a valuation perspective) but it is what it is.
Which is some of the strongest sentiment I’ve ever seen.
See youtomorrow
,-Mike