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
Bolstered. Some bellwether big tech names crushed their numbers last night and bingo bango bongo, the whole earnings season narrative changed. Earnings season is great again and the bulls have trapped the bears – yet again. To emphasize the point, capital flow was very heavy at 141%. The dip-buyers are vindicated and shorts capitulated. Sentiment is the name of the game and bullish sentiment is rejuvenated.
That’s all she wrote. The only question is how long this batch of excitement will last. Transition? Not anytime soon. We’re back in bull market mode.
Let’s see how earnings season are actually playing out since that’s the topic du jour.
2017 Q3 Earnings season:
51% of the S&P 500 reporting (+48% vs 10/13 data)
Surprise vs Estimates
- Sales: +1.0% (-0.2% vs 10/13 data)
- Earnings: +4.3% (-1.2 vs 10/13 data)
Growth vs Prior (Y/Y)
- Sales: +6.3% (+1.1% vs 10/13 data)
- Earnings: +6.6% (unch vs 10/13 data)
Notice that the numbers aren’t very different than early in the season even though the narrative for the season just crystalized as great. Also notice that sales and earnings growth is about 6%. That sales growth is pretty good but I’m not impressed with that earnings growth at these valuations.
Perception is reality though and valuation isn’t a catalyst. That’s been the market environment for over a year.
The case to get long/be long US equities is simple: sentiment and momentum.
I don’t find that case satisfying or compelling but that obviously doesn’t matter. The market embraces the bullish case as it is.
Have a great weekend, see you Monday,