The Zigmont Report (Daily Market Recap for 9/4/18)

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.

Business as usual.  Everyone *should* be back from their summer breaks now and trading should return to normal, whatever that means.  When it comes to volume, today looks promising.  The flow today was 103%.  The news items for the day were pretty uninteresting so perhaps the above-average flow reflects investors re-engaging with capital markets.

Despite the small drop in today’s trading, I think we’re essentially in a holding pattern.  The big catalyst this week will be the August nonfarm payrolls data releasing Friday (+195k est vs +157k prior).  As usual, this number will strongly influence the FOMC’s next rate decision on September 26.  The Fed Funds futures market currently prices at 25 bip hike with 96% probability.

With the market so certain *and* the economy so healthy, it is doubtful that anything but a negative nonfarm payrolls number would shift expectations.  Friday’s NFP data will be widely discussed and it’ll cause some movement in the tape but it won’t change the investment landscape too greatly.

There is a small possibility that the NFP number surprises so significantly to the upside that the market starts to worry about a faster hike path.

The bears would certainly like that but I think that is wishful thinking on their part.  A strong number is probably a good bet but a three sigma number isn’t.

Anyway, the point I want to make today is that the overall market dynamics feel very similar to the summer.  The difference is that we may have more participation going forward.  That’s good for liquidity but probably not significant with respect to trend.

See you tomorrow,