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
The usual please. Stop me if you’ve heard this one before:
- It was a quiet day, with respect to news and data.
- Capital flow was about normal (102%)
- The Intraday high/low range of the S&P 500 was tight (aka realized vol was low)
- The S&P 500 made new all-time highs
What was different about today? Hmmm. Financials led and utilities lagged. That’s a bit different. The yield curve steepened a tiny bit too. That’s different and *maybe* it has something to do with the financials performance today…but honestly, if financials are climbing today because of a 1-2 basis point steepening in the curve… well then I think the market is officially off its rocker.
Anywho, the point today is simply that the market is shuffling along, the way it usually does when things are quiet and we’re waiting for something important on the horizon.
The important event on our horizon right now is the FOMC meeting and decision on Wednesday.
There’s no change in the consensus view. Markets expect no change to interest rates and the announcement of balance sheet reduction via security maturation. Size should be small at first, maybe $10-$20 billion per month. The size will ramp up over months to some monthly size that *hopefully* won’t scare markets. Current size guestimate for that is around $50 billion.
Even if the number is $100 billion, I don’t think markets will worry. The Fed is going to make sure everyone knows that they are going to watch markets and economic data as they proceed and that if they think anything displays stress, they will slow down/halt their reductions.
See you tomorrow,