With stock indexes reaching an all-time high, the big tech stocks – FANGs (Facebook (FB), Amazon (AMZN), Netflix (NFLX), Alphabet (GOOG), and Apple (AAPL)) – may have lost their mojo. The most recent setback to one of the major tech companies is Apple (AAPL). According to Barrons, their new iPhone and Apple Watch are not going to meet sales expectations.
The exact reasoning for APPL’s plummet in sales is relatively unclear, but we can gather something from recent international trade relations. Firstly, China has been investing less in the American economy year by year. This is not of direct fault of APPL, but of China’s decision to cut down on outsourcing and invest more in its own domestic products. The price of copper also took a hit earlier this month due to China’s moderating demands which shows it is not a tech-centred issue.
It has also been evident that the iPhone 8 has been subject to slander on all social media platforms. Every time the Facebook and Twitter community decide they do not like a product, it has a direct negative effect on the sales of that product. It symbolizes that their clients are not happy with their products. APPL have since admitted having poor sales. They have also publicly acknowledged problems with their watch.
Of course, just because one tech company is underperforming, we should not begin to worry about the future of the American Stock Market. However, when FANGs struggle, we cannot throw caution to the wind. These stocks represent a large portion of market capitalization, and it most definitely will be a concern for the S&P 500 and Nasdaq.
On the surface, the American market seems strong due to stock prices chugging higher, regardless of APPL’s recent decline. But analysts are persistently pointing toward a low reading of Chicago Board options Exchange Volatility Index (VIX). The VIX, commonly understood as the fear index, signposts to us the volatility of the market. If it is low, then there is little fear of for investors looking to invest. The index is currently high. This means, although stock prices are rising, the market at any second could be volatile. Risks that were once safe, become high-risk. It makes for an uncomfortable climate that investors tend to avoid.
Apple’s sales to China have underperformed, but this should not necessarily spook investors. It means that other regions will have to outperform expectations. It is possible that demand is coming from elsewhere, and that due to the September hit on the Copper industry, Apple realized China would underperform regardless, and thus changed their target location. In other words, lower sales to China is not directly related to the outcome of the market. We could see a resurgence of APPL shares shortly, when the iPhone is released.
According to Michael Khan, APPL and FANGs decline does not spell the end for the American market. It seems that in the current financial climate, the failings of APPL’s most recent product is being supported by other facets of the market. The market could remain stable, bearing in mind its normal fluctuations. Unless there is some major political shift in congress, or a major international confrontation – everything should level itself out.
(Please note: James O’Leary does not currently hold a position in: Amazon, Alphabet, Netflix, or Twitter; and Henry James International does not currently own a position in:. Amazon, Alphabet, Netflix, or Twitter)
(Please note: James O’Leary currently holds a position in Apple and Facebook; and Henry James International currently owns a position in Apple and Facebook ).