The Zigmont Report (Daily Market Recap for 11/20/18)

Mike Zigmont

Mike Zigmont, author of the Zigmont Report, is a partner at New York-based Harvest Volatility Management, a hedge fund with over $12B 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.


General negativity.  The bearish winds are blowing across the globe.  Asian markets were down 1-2 percent.  Europe was down in our early morning and our premarket futures were down substantially.  Regular hours trading didn’t help turn the negative tide today.  Europe finished with a little rally into their close but they were still down about a percent.  Our market bounced around but was significantly down the whole session.  Bulls tried their best as Europe closed and as our lunchtime came around (intraday highs were at noon) but stocks dropped back in the afternoon and the lows of the day printed around 3 PM.  Bulls pushed back some in the last hour of the day.

The reasons for the continuing selloff remain unclear.  Like so many prior sessions, we experienced no meaningful headline, no bombshell revelation that everyone understood to change the investment landscape significantly.  We continue to exist in a news-lite environment with emotions feeding on themselves and the most recent tape movements.  This means we can rise and fall quickly for no apparent reason.  It’s a blender out there.

All sectors of the S&P fell today and the biggest losers were energy (-3.3%) and tech (-2.4%).  Utilities were the best performers (- 0.3%).  Obviously, that’s to be expected if capital is de-risking.  The Treasury curve twisted today though.  Rates on the long end dropped while yields on the front end climbed.

This is not the usual risk-off behavior in bond-land.

For the global financial system, it is not a panic.  Economic slowdown concerns are mounting and the market is backing off its expectation of a hike from the Fed in December.  Current market implied probability of a hike is 68%.  That’s down from the highs which were around 80%.

We should also mention that crude oil continues to drop.  Crude topped out around the same time as stocks but crude is 30% off the highs versus 10% for the S&P 500.

So what we have right now is a bear market in crude coincidental with a correction in equities.

Is it really a mystery why the mood is dour?

I don’t know what might improve investor sentiment but I think a small positive change will result in a heck of a rally.

Homework question:  is the bull market over?

See you tomorrow,
-Mike