The Zigmont Report (Daily Market Recap for 1/18/19)

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 and do not necessarily represent those of Harvest Volatility Management, LLC.

3-day weekend.  Bulls celebrated the coming 3-day weekend all session.  Overseas equities were up 1-2% and our premarkets were up about half a percent.  Earnings reports continue to help the longs even though Netflix fell 4% today.  The broader market did not trade sympathetically with Netflix today.  In the morning trading another headline/rumor about the US/China trade situation broke.  This time it was from China and involved China offering to increase its purchases of US goods over the next 6 years.  They suggested that they would increase purchases so much that they’d drive the US/China trade imbalance to zero.

The gesture spurred investors to buy and now there’s a specific set of outcomes imbedded in the market.  A zero trade imbalance is a very Trump-specific carrot.  It certainly sounds good.  Will it actually play out that way?  I don’t know.  Should it cause us to boost our valuations?  Again I don’t know.  It certainly looks like China wants to come together with the US as resolve the dispute.  This gesture is certainly a positive signal.  We’ve seen them before and we’ve seen negative ones too.

There’s a lot of positivity out in equity land now.  The rally from Christmas Eve has been remarkable.  January has been a Godsend for the longs.  The sentiment volatility remains very high.  Investors just don’t mind because the swing has been so positive lately.

I don’t trust it.  I don’t think we’re off to the races again.  I think this is just the response to December.  And it’s a helluva response.

Have a great weekend, see you Tuesday.