The Zigmont Report (Recap for 5/9/19)

Mike Zigmont

Mike Zigmont, author of the Zigmont Report, is a partner at New York-based Harvest Volatility Management, a hedge fund with over $10B 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.

Waiting for the deadline.  Markets continue to worry about tonight’s deadline.  Come midnight tonight, east coast time I presume, the expanded US tariffs on Chinese trade go into effect.  Trump made a statement during the day that he received an encouraging sign from China and that maybe there’s something different that can be done to change the deal or avoid the increased tariffs or whatever…  to be clear, Trump’s statement isn’t very clear.  It was hopeful and encouraging and spurred the bulls to push stocks higher but it was completely nondescript and empty.

This drama occurred around noon and the S&P was down about 35 handles at the time.  After the Trump comments the market rallied 30 handles.  We treaded water up there for a couple of hours and faded some into the close.

The bottom line, for the moment, is that a trade deal does not appear imminent and higher tariffs do.  The market isn’t treating this as a disaster, which is reasonable.  The market is treating this as a bearish event.  I don’t think there’s much upside to be had with a trade impasse as part of the landscape.

But I also don’t believe this requires a whoosh downward.  The market *seems* to feel this way too.  Maybe a back-and-forth environment with the S&P in the 2800-2900 range is what we’re in for?

I don’t know whether that’s a fair value range by the way but if emotions stay where they are, it feels about right.

Now here’s the risk, China.  What’s China going to do after the tariffs increase?

None of us know but that is the true wildcard in the near term.

Until we see China’s next move, I think we’ve found a level of relative emotional stability.  By this I mena that we’ll still see big price swings in the equity market but I don’t think we get meaningful trends.

See you tomorrow.