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.
Value? There’s a continuing change in the sentiment of the market, which essentially began Friday, but there’s also a new topic of conversation out there now too: value. The growth-might-be-over (or overbought at a minimum) conversation is spreading across the street. It popped up in all kinds of research pieces this weekend and even became a recurring conversation point on CNBC. This is a *very* quick turn in perception, especially since we didn’t experience an enormous change in the investing world. Facebook and Netflix disappointed with their guidance…. That’s obviously important but that’s not like when Lehman went under or the attacks on 9/11. Those led to fast changes in investor sentiment also, but the causes for the shifts then were clear and enormous.
Anyway, it looks like the psychological state of the market may be shifting. A big dip-buyers’ push of the tape higher could revert it, but at the moment, the vibe I’m sensing is that investors are rethinking their love affair with growth and wondering about value.
If we’re in the beginning of a true sentiment shift in the market, that’s a big deal. It has the potential to stall the bull market or even spur a correction. I wouldn’t suggest battening down the hatches but overweight growth positions certainly merit a trimming and I wouldn’t reflexively dip-buy either.
In the near future (this week), there are three major catalysts/events that will assist the current narrative change or kill it. They are:
- Apple earnings Tuesday after the close
- The next FOMC decision Wednesday at 2 PM (no change expected)
- July nonfarm payrolls print Friday at 8:30 AM (+190k est vs +213k prior)
AAPL’s results could easily return the market to its old go-go-growth ways. The Fed’s next decision will likely be a do-nothing but it’s unlikely that the statement changes in a dovish way. With the strength of the US GDP, the payrolls data will likely be strong as well. If those assumptions are correct, value will likely get more attractive in the short term.
Ya never know of course but it seems less likely to me that blowout numbers from Apple will inspire renewed faith in the FANG names and other tech/growth stocks. I have no doubt AAPL will be rewarded but I don’t see the bullishness spilling over. So looking at the week, I think the value trend has legs.
We shall find out soon enough.
See you tomorrow,