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.
Optimism gone. The optimism/hope of last week disappeared today. Nvidia and Caterpillar guided poorly and China was to blame. Those stocks were punished and the market’s wishful thinking about earnings season was rattled. Despite the broader rally this year, the already existing concerns about China’s slowdown, and a global slowdown, finally seeped into earnings season. There was an optimistic hope that all this macro stuff wasn’t really going to affect companies too badly. I don’t know why that was the hope but I’m sure the rally helped foster it. Now that hope is dashed.
That doesn’t mean we’re crashing and that the world is falling apart. It just means that the sentiment swing of the last three weeks has turned. We don’t have to move directly into despondency so the tape doesn’t have to return to the December lows. I think we’re moving towards some zone of realism…and if that’s true that will result in some trading stability.
If the reflexive urge to buy-the-dip can take a break for a spell, perhaps the market can adjust to a 2-ish percent growth rate in the US and a 3-ish percent growth rate in the world and a status quo interest rate environment for a while?
Those conditions aren’t horrible. They don’t merit 17+ multiples either. There’s some appropriate level that we need to find and we need to sweep the permabull and permabear emotions out of the way to get there.
I don’t know if that’s possible, but it’d be nice.
See you tomorrow.