Mike Zigmont 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.

Autopilot. Today was a stereotypically quiet summer trading day. Capital flow was 85% of normal. News was uninteresting. The tape climbed slowly. The bulls are the only ones at their computers it seems…or more likely, since the bears are so abused, bears are staying out of the mix until they get a negative headline to pile into. That didn’t happen today and I wonder when it will happen.

The trade war headlines have slowed down and also lost their potency. The China/US trade rhetoric is still a little prickly and tit-for-tat but the market is completely unconcerned. The market narrative is that the US is winning the trade war and that the fighting of the trade war is trivial.

I don’t know about all that but with robust GDP growth in the US, even if the trade problems are hurting our economy, investors are more than happy with what we’re actually printing and so optimism reigns in US equities.

Baring a surprisingly negative macro datapoint, that suggests a heavy price to pay, US equities aren’t going to give a hoot about trade-war & tariff headlines. Actually there’ll probably be a bullish move when everything is officially negotiated/over.

So stepping back for a bit, the bulls hold all the cards and things look as rosy as can be. This is a very unusual situation. The actual environment *

has

* risks to equities but the market is ignoring them. Just a couple examples:
  • Fed hiking
  • Flat yield curve and potential recession signal
  • Trade/tariff risks
  • Climbing energy prices

I don’t think that these issues require a big selloff in equities but I am surprised with the blasé attitude of investors. These things used to matter. They used to affect market sentiment. Currently, they cannot keep investors out of an optimistic mindset.

It feels like we’re on a runaway train to euphoric too.

The struggle for the narrative of the market last week is now over. Bulls won.

Next fight is TBD.

See you

tomorrow

,

-Mike