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.
FYI, I’m out of the office for the rest of the week. Next Recap will be Monday the 12th.
Results pending. Capital flow was very light today at 85%. The market happened to climb a little but with so little activity there’s nothing for us to extrapolate from the actual move.
Investors are waiting for the poll results. The consensus opinion is that the House will flip to the Democrats, the Senate will stay with the Republicans. There is no consensus opinion as to whether that result is bullish or bearish for equities. The bulls are claiming that the collapse of election uncertainty will allow stocks to lift. The bears are claiming that the election *might* have a short-term effect on stocks but it won’t change the fundamental forces in play.
The bottom line is that nobody really has a good feel for what the expected outcome in the election will do to the market. It’s widely believed that a Democratic sweep of both the House and Senate would drop equities and the opposite would produce a pop.
Even though that’s the consensus…I’m not even sure that’s the likely reaction to those unlikely election outcomes. We’re dealing with psychology political winds…. things that don’t cleanly translate to economic valuation. Republicans good, Democrats bad just doesn’t seem like a trustworthy heuristic.
Anyway, my point is simply that the market reaction could be the opposite of what everyone expects. Even if you know the outcome of the elections (which you don’t), you can’t be too confident that you know how the market will react.
We’ll all find out soon enough I guess.
The market uncertainty doesn’t clear up tomorrow however because the FOMC still has its decision to release on Thursday. That’s a big deal too.
So if investors are truly waiting for the catalysts to pass, they’ll be on hold until Thursday afternoon.
Maybe that means that you can’t really trust what the tape does until Friday?
Have a great week, see you Monday.