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
Bulls always win. Stocks rallied again today. The nonfarm payrolls data disappointed (261k vs 313k est & 18k prior revised from -33k) but these are heavily distorted numbers because of the hurricanes. The bounceback in jobs hasn’t been as sharp as expected so investors are now spreading the jobs out over a couple of months. That’s not that big of a deal and the big picture view of the economy is the same as before. That view is that the economy is growing nicely and a growth ramp is coming.
If that sounds familiar, you win the kewpie doll. That’s been the late-in-the-year narrative every year since ’09.
Whether this time it’s different or not, doesn’t matter. The market is a self-fulfilling prophecy at this point.
It goes up because it went up. Dips are bought because that’s what works.
I probably sound like a short at this point, griping about how the market is so silly/foolish/stupid. That’s not my intention.
I *think* that the market is overvalued but I also admit that if the US can grow around 3% GDP for a few years (let’s just say 3) and if earnings growth can be 10-plus percent for the same period, this market is worth owning/buying.
To me, that’s a tall order though. Three more years of smooth and fairly ambitious growth….. it doesn’t seem like a good bet. It seems like a small longshot…. That said, if the longshot comes in, then owning stocks along the way will have been a rewarding decision.
The comparisons between this market and the late 90’s market are interesting. No need to go over the comparisons line by line but we all know the most important conclusion.
Valuations started to stretch in ‘96, the bull ran nicely for 4 more years. The bull collapsed when the growth disappeared.
So the historical comparison isn’t very helpful because the question is: when will the growth end?
Have a great weekend, see you Monday,