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
Keeps climbing. US equities printed another small gain on almost normal volume (96% capital flow today). As has been the nature of the markets lately, news was uneventful and the tape bobbed gently along during the day. The intraday high/low range today was 19 basis points. That calm of a day happens about once in every 5 years.
Today was a quiet day for sure…but was it one of the quietest days in the last five years?
My answer is no. Trump gave a doozy of a speech at the UN and Mexico City experienced a 7.1 earthquake around2:15 PM
eastern time. Also the Fed announces its next policy decisiontomorrow
.We face the same question and have no good answers (at least, I don’t).
Why is the market so cavalier?
We’re not witnessing a dismissal of an odd event here or there. This is a systemic and prolonged rejection of risk.
I’ve never seen anything like it.
One of the (many) things I worry about is that the people who are, and have been, advocating caution and concern, have been so wrong for so long, they are now the boys who cried wolf. We all *know
* that the market is unusually calm. We all *know
* that the market has been unusually generous to the bulls over the last couple years.But if you lightened up, or if you hedged, or if (God forbid) you went short, you have been punished both in terms of your P&L, your reputation, and probably also your mental health. I’m sure a lot of investors made prudent risk-reducing moves over the last two years and gave up along the way and just plowed back in, as long and as strong as ever. Maybe even with more leverage or risk to make up for lost gains.
It feels like the largest game of musical chairs ever. At least during the dot-com bubble, the swings were so large, investors *knew
* the game was risky. The swings lately are so small that I feel like most investors assume there is no risk.What stops the music? That’s the biggest question I can think of for the foreseeable future.
Is it going to be a recession? Is it going to be a war? Is it going to be a massive financial failure? Is it going to be a crappy earnings season?
I don’t know. And it really may not matter what it turns out to be. What matters is the when?