The Zigmont Report (Daily Market Recap for 9/24/18)

Mike Zigmont

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

Rosenstein.  Overseas markets were down small and our premarkets were the same.  US equities only fell more significantly once news/rumors about Deputy Attorney General Rod Rosenstein came out.  First the news was that he resigned.  Then the news was that he wouldn’t resign but would make Trump fire him.  Then Rosenstein was heading to the White House.  At this point he’s having a face-to-face meeting with Trump on Thursday.

I’m not a political news junkie but the issue, it seems, is that if Trump fires Rosenstein, there’s potentially hot water for Trump.  If Rosenstein resigns, Trump can appoint someone else to head up the Russian probe, which presumably would be quite good for Trump.  Who knows what all the in-between possibilities are?  The big picture bottom line is simply this: the political situation is in flux.  It makes sense to me that equities would pull back on that reality.  Equity investors didn’t worry too much though and the S&P recovered half the worst damage over the course of the session.

When it comes to economic news, today was quiet.  The 10% tariffs on Chinese imports went into effect today.  That news merited a few headlines but it wasn’t new information.

Essentially today was a session without a catalyst.  We happened to go south but it was a trivial drop.  I expect tomorrow to be a trivial move, up or down, also.

Wednesday’s FOMC rate decision (25 bip hike expected) is the key catalyst of the week/month.  The rate hike is almost universally anticipated.  The forward guidance will generate the action/reaction of the markets.  The December hike is currently priced with a 78% probability.

See you tomorrow,