The Zigmont Report (Daily Market Recap for 7/31/17)

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 shortly after the market close.

The opinions expressed below are my own

Boring conclusion.  July is in the books and the final trading day was a snooze.  Bulls won the month with about a 2% gain.  The bull market continues.  Let’s look at the monthly scoreboard since the election.  These numbers exclude dividends:

That’s a heckuva run for the bulls.  I don’t see a reason for it to reverse either.

The name of the game is sentiment.  Sentiment is strongly bullish and very robust.  Small-to-medium events, resulting in or including selloffs as large as 2-3%, are not important enough to change sentiment.  The buy-the-dip mentality has been too strongly reinforced over the last 8 years.   Here’s the chart that every investor is using as a playbook.

It is VERY unusual for a strategy to work without exception for 9-plus years.  That is what we’re dealing with though.  The only way for this to change is for a massive catalyst/event to change the investing landscape.  That just isn’t going to happen as a result of the normal course of business.

Only a game-changing event (or sequence of events) will crack the dip-buying sentiment that keeps equities climbing.

What changes the game?  Here are some likely guesses:

  • War
  • Recession
  • Earnings collapse
  • Aggressive Fed hiking

If you have other ideas, please send them my way.

Regardless of the list of possible whats we could imagine, it’s highly probable that the when of any of these things is way off in the future.

If that’s correct, the sentiment of the moment will continue to carry the day.

See you tomorrow,