The Zigmont Report (Daily Market Recap for 12/6/17)

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

Who won?  Did the bulls or the bears win today?  The S&P eked out a loss and maintained the bears winning streak.  The market opened a few handles lower though so the bulls have that going for them, which is nice.  The bears may be declaring more of a moral victory because the tape was higher in the late afternoon and they didn’t get their heads ripped off by a 20-handle rally.  Capital flow was completely unremarkable at 103%.  Market-moving news was non-existent.

The one bit of data worth mentioning was the November ADP labor data (190k vs 190k est & 235k prior).

This bullseye is only noteworthy because it sets up a highly probable non-event when the nonfarm payrolls data releases Friday (195k est & 261k prior).

Friday is probably going to be quiet.  I’m always worried about those kinds of famous last words but that’s the best guess.  The street isn’t likely to be surprised and if the number is somewhat off of expectations, the street will still not react much.  The next FOMC decision is a week from today (Dec 13th) and Fed Funds futures are pricing in a 98% probability of 25 bps hike.  67 of 72 analysts surveyed by Bloomberg expect the same.

Ever since normalization became a possibility, the Fed has painstakingly worked to manage market expectations.  If the street were off from the Fed, the Fed would offer guidance.  There hasn’t been any guidance though.

Q.E.D.

That’s not just my thinking.  That is the assumption of the market.  The hike is coming because the Street expects it.

Nonfarm payrolls won’t change the next hike decision.  The only thing that can change it is a true bolt-from-the-blue disaster.  Barring that, we know the future.

See you tomorrow,
-Mike