The Zigmont Report (Daily Market Recap for 3/19/18)

Mike Zigmont

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

Surprising selloff.  US equity markets took it on the chin today.  It wasn’t carnage but it stung.  The news and data was unremarkable again but the event of the day was the Facebook/Cambridge Analytica issue.  In a nutshell, Cambridge Analytica used surveys, voluntarily taken by millions of users on Facebook back in 2014, to gather huge amounts of data on Facebook users.  This data supposedly allowed for such effectively targeted news and ads that they were able to tilt the US Presidential election in favor of Trump *and* that they’ve been able to effectively steer US political culture since….

Unclear issues at the moment are:

  • how CA used the access to Facebook to get data from not just the people who submitted the surveys, but also those people’s Friends
  • if CA and/or Facebook violated any existing agreements or laws at the time
  • if CA deleted the “tainted” data, which they claimed they did
  • if CA is still using the conclusions/models from the tainted data to influence people

There are other questions too but those are the biggies that investors are fretting over.  These questions naturally apply to any company that possesses big data sets on millions of people.  Google, Apple, Netflix, Amazon are some big names in that position.

Anyway, the point is that this issue could be big…  or not.  We don’t know at the moment but obviously markets sold off all the FAANG stocks today.  Those stocks have led the market higher, relentlessly.  So when they roll over, the whole market does too.

And that’s why (I think) equities took the hit they took.

The weird thing about this is that the flow today was about average at 100%.  That’s really odd.  Selloffs usually coincide with heavy volume and today the volume was normal.  I can’t explain it.  I don’t know if that’s good or bad for the bulls or bears.  Probably it’s neutral.  At the moment, the only conclusion I can draw is that it is uncommon.  Do with that what you will.

While FAANG stocks and the implications of massive data sets on millions/billions of people is the topic du jour, I’m still thinking about the FOMC decision on Wednesday.

The hike remains a lock.  The question is how the market will react.  After today’s selloff, I’m guessing the bulls have the advantage.  This FAANG dip isn’t going to scare them off their dip-buying strategy and if the Fed doesn’t skew hawkish, I can see them getting longer.

That’s two sessions away though.  We need to see how tomorrow plays out.

See you tomorrow,