With the market’s gains in recent days, many investors may be getting more confident that a big correction is not on the cards. However, while technical signals are looking good, there is some evidence that the big rally in stocks is set to end. One of the more worrying signs is that major tech companies like Alphabet, Apple, and Facebook, are all in decline. These stocks represent a major share of total market capitalization, so losses there may wound the S&P 500 and Nasdaq as a whole. Yields are another area to keep an eye on, as they were falling recently (bearish for stocks), but have stalled.
FINSUM: There are, as ever, some bearish indicators on the margins. But as has been the case for several years, this does not mean the market will fall.
A lot of articles came out today warning that Apple’s new iPhone 8 sales may be slow. Most sources saw this as a sign of weakness for Apple. To be clear, the iPhone 8 is not the groundbreaking new iPhone you’ve been hearing about, that is the iPhone X. Rather, this is the updated version of the iPhone 7. Despite the fears, the Wall Street Journal took the opposite line, arguing that weak demand for the new device might show there is a lot of excitement for the iPhone X’s release. Apple decided to stagger the debut of the phones, with the iPhone 8 coming out earlier.
FINSUM: We do not think weak iPhone 8 demand is necessarily either bad or good for the iPhone X. For example, even if demand is weak for the 8, it does not mean there is strong demand for the X.
It is hard to imagine Goldman Sachs as middling or even, dare we say it, an underdog. However, that is exactly the position the company is in, at least for the moment. Goldman’s rankings in the fixed income league tables leave it tied for third in an area it usually dominates. It has never been ranked lower than second in fixed income since 2007. Additionally, its shares have fallen this year while those of all other major banks have risen, leaving at a relatively weaker valuation than its rivals, such as Morgan Stanley.
FINSUM: We think that Goldman Sachs is a well-run organization and we expect their earnings will bounce back quickly which means now may be a good time to buy.
One of the world’s largest fund providers just went on the record warning investors about the stock market. Vanguard says it is surprised by how well the economy has been performing this year, but that such performance does not make it more hopeful for stocks. The fund provider says investors should expect “muted returns” for the next decade. According to Nathan Zahm, a senior investment strategist at Vanguard “what we caution investors on, particularly given that landscape and given the very strong run we’ve had, is that forward-looking returns are now quite muted.” Valuations are a big part of the company’s worries about returns, said Zahm.
FINSUM: This is about as close as you will ever get to a major fund manager saying stocks are ready for a fall. Vanguard obviously has a lot of insight into the market, but we don’t necessarily agree that returns will be poor for a decade. That just seems way too long for any kind of accurate forecasting.
There has been a lot of hype around the VIX this year. While the index usually gets a lot of press attention as “Wall Street’s fear gauge”, this year there has been much higher interest in trading the index. That said, Barron’s argues that as a gauge, the VIX is pretty much pointless. The reason why is that it tells one very little that is not already obvious from trading performance, and its utility as a forecasting tool has been proven to be very poor.
FINSUM: The fact that the VIX seems useless is really the media’s fault. Rather than focusing on it as an indicator or predictive tool, the media should accept the VIX for what it really is—a way to trade volatility.
Just over a week ago Apple debuted its new iPhone X, the most important product release in years. But alongside that, it also showed off a new Apple Watch, which has a significance much broader than one would think. The watch uses a new SIM-less technology which allows it cellular connectivity without a phone, something many believe will be the future of smartphones themselves. However, Apple admitted yesterday—after complaints from media outlets testing the device—that it is having cellular connectivity issues. Apple plans to release a software update to handle the issue.
FINSUM: Apple admitted the problem but seemed a bit a dismissive. If the watch, which goes on sale next week, gets bad reviews, it could theoretically effect iPhone sales.