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
Hawkish testimony? Jerome Powell, the new Fed Chair, gave his testimony to the House Financial Services Committee today. I didn’t think he said things that were shocking or wild but the treasury market thought his comments were notably hawkish. The possibility of a 4-hike year is increasing and yields across the curve climbed today. That mattered to equities and they slowly sunk over the course of the day.
This all makes perfect sense and we shouldn’t be surprised. Rates matter. Why equity markets didn’t think they mattered yesterday is the head-scratcher. Apparently, equity investors are only reminded of the fact that rates matter when rates climb on the day. I can’t explain the why of that. I can only observe the what.
So here we are, swimming in a little bit of negativity with respect to the outlook for equities. It’s not anything to worry about but it took a bite out of the renewed optimism (*cough* silly) from yesterday. I welcome a little more market focus on the downside. I want the market to weigh the positives AND the negatives, not just the positives. Implied vols certainly did that up today. Maybe options investors are paying closer attention than before?
An old boss of mine used to say that markets go up AND down. In his Austrian accent, it sounded like ‘aaaap AND down’ and that just made the point that much more memorable.
It’s about time investors remember that. We’ll see.
aaaaaap *AND
* down! See youtomorrow
,-Mike
