The Zigmont Report (Daily Market Recap for 3/21/18)

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

Don’t rock the boat.  Markets were quiet the whole day and the S&P was flat at the open and +8 handles at the FOMC decision at 2 PM.  Robots slung futures around for a few minutes and then the S&P rallied to about +21 handles.  Equities sold during the press conference and the S&P was off 5 handles by 3PM.  The tape rose gently into the close and printed about flat.

So stocks moved around a fair amount, but not that much given that today was a Fed day.  As far as FOMC-induced volatility goes, today was a 1 on a scale of 1 to 10.  If I had to grade Chairman Powell and the Fed today, they get an A.  They didn’t shake up investors and here’s what they said.

  • 2 more 25 bip hikes this year
  • Probably 3 25 bip hikes next year
  • If something major happens, they’ll adjust policy

That is completely in line with all the guidance of the past and that’s exactly what investors wanted/needed to hear.  Forget whether that’s appropriate central bank policy or not.  The non-policy question that hung like the Sword of Damocles today was *how different* was the Fed about to become.

Almost no difference is the answer.

That is good, in the short term, because it means that investors don’t have to reprice their Fed guidance.  They don’t have to worry about whether there’s a new crazy sheriff in town. Everybody can exhale.

Now we can go back to good old-fashioned worrying about whether the policy itself is appropriate or not.

It’s not obvious to us now, whether this is proper policy or not.  So we just have to wait and see.

That’s a big win.  See you tomorrow,