So Goes Apple, So Goes The U.S. Market -

So Goes Apple, So Goes The U.S. Market

Nov 14, 2018Jeremy ParkinsonFinance0

Apple (AAPL) has been one of my largest individual holdings for the bulk of the post-recession stock bull. I believed in it when it was trading for one-tenth of its current value back in 2009. I even believed in it when it plummeted 40% in the winter of 2012-2013.

Back then, though, Apple’s troubles did not adversely affect the broader equity rally. On the contrary. The S&P 500 exhibited all of the signs of a powerful uptrend.

More recently, Apple (AAPL) has been moving in lockstep with the large-cap barometer. The circumstance may prove detrimental to those who think the current downtrend is little more than a hiccup.

The collective movement of thousands of individual securities rarely depends on an individual company or a single sector. The “FANG trade” — Facebook (FB), Amazon (AMZN), Netflix, (NFLX), Google Alphabet (GOOG) — actually began to unwind in July. And yet, the major indexes still logged new records in September.

Still, the shift away from prior market leaders in the technology and consumer discretionary segments burdened Apple (AAPL) tremendously. With FANG accounting for nearly 25% of the Nasdaq 100 proxy, Invesco QQQ Trust (QQQ), Apple’s 13% weighting has become that much more critical for bull market well-being.

It’s not that Apple (AAPL) is incapable of bouncing back quickly. It recovered steep January losses in the month of February.

On the flip side, weakening iPhone sales have not been helpful for the semiconductor space. Indeed, “chip” stocks often foreshadow economic downturns.

There are those who are focused so intently on recent strength of the domestic economy that they are unable to see the forest for the trees. For example, oil prices do not lose 25% in value in a matter of weeks when global demand is strong. Not ever. Nor is this merely a case of excess supply.

In truth, the world’s economy has been slowing to a crawl. The German economy contracted in the 3rd quarter. Meanwhile, China is dealing with a massive debt bubble and a trade war. (Note: China is the world’s largest importer of oil.)