The Zigmont Report (Daily Market Recap for 9/8/17)

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 it daily shortly after the market close.

The opinions expressed below are my own

Still waiting.  Other than the earthquake in Mexico and a massive data breech at a major credit reporting agency, today isn’t very different than yesterday.  Investors continue to wait-and-see what Irma will bring.  We’re also waiting-and-seeing what North Korea might do to celebrate their 69th anniversary.  Current speculation is an ICBM test of some kind.  We’re also waiting-and-seeing for whatever else might be unforeseeable.  The hurricanes and the earthquake and the data breech, while not affecting markets too much (yet), have forced markets to rethink things.

What *might* be lurking as a risk/danger?  What *should* prices be if the future isn’t all sunshine and rainbows (summer perception)?

Capital flow was actually a tad light today at 96% and the move in US equities was trivial.  Implied volatilities picked up some too.  Implieds moved more than one would expect for a 3-4 handle drop in the S&P 500.  So *maybe* markets are starting to rethink general risk levels.

Markets might go back to not worrying come Monday but we could also be beginning a transition to a new volatility regime.  We’ll have to see if volatilities (both implied and realized) stay higher or if they plop back down next week.

The two tend to go hand in hand of course.  Usually the realized leads the implied but the last couple days, that hasn’t been the case.  That’s part of the reason I think perceptions are in flux.

Perceptions become reality in so many things, especially markets, but not necessarily for volatility.

I, you, and the investing population may start to re-perceive risk (as I think it should), but if the price action doesn’t materialize to confirm/reinforce the perception, it’s only a matter of time before the perceptions revert.

See you Monday, have a great weekend.