The Zigmont Report (Daily Market Recap for 1/22/18)

Mike Zigmont

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

More upside.  Premarket stock futures were a little down but stocks rallied from the open over the course of the day.  The news of the day was the end of the government shutdown.  A temporary compromise between Schumer and McConnell means that whatever government services that stopped on Saturday will resume shortly.  Investors didn’t care when the government shut down and they didn’t care when this re-opening news broke.

That said, that was the big news of the day.  Capital flow was healthy at 110%.

January has 7 more trading sessions to go and of the 14 we’ve had, the S&P was up 11 and down 3.  The S&P is up ~6% for the month.  For S&P performance, this puts Jan’18 in the top 10% of months right now (going back to 1984).  Who knows how we finish given 7 sessions to go.  The wacky thing about the recent rally is that it’s occurring in a very low volatility environment and we haven’t had a down month to entice the buyers.

We may not be experiencing the emotional mania we did back in the dot-com era but the overall result is very similar.  The rally is large, the valuations are stretched, the attitudes are cavalier.

This market behavior makes me think that there’s something very wrong at work.  Either investor attitudes are to blame and this is just another example of collective investor greed…. or… and this is much more worrisome:

This is the result of global central bank policy errors.  Too loose for too long conditions have triggered a wave of flow through equities.

We discussed that a little bit in past recaps and this is the only thing that really scares me, with respect to  this market.

I hope hope hope… that we’re just dealing with greed.  That can fix itself without egregious pain.

See you tomorrow,