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.
Nervous wait. Turkey remains the front-burner issue for markets. US equity futures were down small in sympathy with Asian and European markets but the dip-buyers did what they do in the morning. US equities climbed after the open and peaked around 10:30 AM, up around 10 handles. There was no significant headline to explain the rally. Stocks fell slowly from there and bottomed around 1 PM, down about 13 handles. No headlines to explain that move either. Back and forth trading continued into the close. Capital flow was light at 92%.
Investors don’t know what to do at this point. It kind of feels like they are deer in headlights although that might be a little harsh/biased. There’s not much new info available so there’s also a good case to make that investors are waiting-and-seeing.
Let’s set interpretation aside for a moment.
Markets are more nervous today and higher implied volatilities reflect that but the market hasn’t decided if a direction is appropriate. The to-be-answered question is:
Will Turkey’s crisis spread?
Maybe it spreads through direct economic channels? Maybe it spreads simply because fear becomes the psychological condition of investors? Maybe investors will ignore it and forget it shortly?
I don’t have the answers and neither does the market. Obviously, some investors are making their speculative trades but the market as a whole is undecided.
When we learn something clearly, the market reaction will be big.
Until then, it feels like we’re walking on eggshells.
See you tomorrow,