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
Whole lotta nuthin.’ More earnings, more macro data, little-to-no market action. Amazon’s results disappointed on earnings but beat on revenues. That sent a bit of a chill through the broader market but nothing too significant. Saw a crazy info graphic about Amazon that just hammers home the fact that management AND sharesholders are A-OK with the crush-the-competition game, Here it is.Anyway, the narrative for the whole of earnings season remains good. Bearish hopes that AMZN’s earnings miss would crack the tape were misplaced.
When it comes to macro data, the info of note was the advance estimate for Q2 GDP (2.6% vs 2.7% est & 1.2% prior revised from 1.4%). So US GDP for the first two quarters of the year appear to be:
1.2% then 2.6%
That ain’t so great.
Obviously the market isn’t worried and probably views this as insurance that the Fed is going to keep the easy money party going.
I continue to think that the macro fundamentals and the equity fundamentals are on a collision course. One set will have to adjust to the other. Given stretched equity valuations, I think long equities are a bad risk-reward. If a recession were to show up, lookout below. However…
Valuation is not a catalyst. I’ve been worried about this for the whole year but the bulls continue to roll. Sentiment is firmly established as bullish and there hasn’t been an event to burst that bubble.
I think that this reality will continue. We are going higher until a disaster forces a sentiment change. A bolt-from-the-blue is a perpetual risk but that’s impossible to position for… so I think it comes down to earnings seasons and Fed actions (but the Fed doesn’t want to spoil things).
So the bulls will keep winning until we get a stinker of an earnings season. Next chance for that is early October.
Until then, long is the way to play. Just understand we’re playing a game of musical chairs.
See you Monday, have a great weekend.