Mike Zigmont

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

Aiming for 2440? US equities climbed a little again today. News wasn’t very significant and while the North Korean missile test is getting a lot of attention, investors aren’t concerned. North Korea has been acting up for a while and markets are now almost fully immune to their actions. This is a clear case of the Boy Who Cried Wolf. Geopolitics are not my forte but it seems that markets will not react to North Korean news unless hostilities break out (or appear imminent). Yikes. Let’s hope nothing ever happens. That reminds me of the saying hope for the best but prepare for the worst.

Everything above doesn’t suggest one should prepare for a crash by the way. It’s just another reason to dial back your risk. The macro fact pattern suggests a more cautious approach going forward and North Korea just threw itself into the mix as yet another reason to ease off the gas with your portfolio.

And yet investors keeping chasing the tape and keep gobbling up equities. I’m shaking my head. Good luck and God Bless.

In the short run,

tomorrow’s

ADP (185k est vs 253k prior) and

Friday’s

nonfarm payrolls (177k est vs 138k prior) are the major catalysts of the week. Those numbers will influence the Fed’s short-term behavior. In the last two years, we haven’t faced major surprises from these numbers and the markets have really reacted to any data within 150k of the estimate. It’s therefore probable that those data preserve existing Fed plans and the markets won’t do much as a result.

An outlier is the risk. A huge beat would ratchet up hiking expectations and probably be equity bearish.

A huge miss would probably be taken as a sign of (or risk of) a coming recession. This would be equity bearish too.

So bears are hoping for a surprise either way but they need an outlier. Even a large surprise probably won’t be enough to jostle the existing market narrative.

Both number release well before the open so futures will tell us what the world thinks of the actual data.

See you

tomorrow

,

-Mike