From Barron's "Dow Futures Rise, Tech Leads" posted early Friday:
Stock futures were rising Friday, led by shares in the technology sector as bond yields pulled back...
The Nasdaq index rose more than 1.6% Thursday after the yield on the 10-year Treasury fell to 3.068%. Early Friday, the yield was at 3.063%.
Lower long-dated bond yields make future profits more valuable, especially for fast-growing tech stocks whose valuations reflect a relatively long-term stream of future profits.
Tech stocks have been hit particularly hard this year as central banks, including the Federal Reserve, have moved aggressively to boost interest rates. The Nasdaq has declined more than 28% this year.
Stock market gains Thursday came after the second day of congressional testimony from Federal Reserve Chairman Jerome Powell, who reiterated that the central bank’s efforts to cool historically high inflation by increasing interest rates could lead to a recession. The Fed chief, however, also indicated that if the economy and inflation slow down enough the the Fed could slow down the pace rate hikes.
Zach Stein, chief investment officer at investment advisory firm Carbon Collective, said that while markets have started to recover concerns that led stocks into a bear market still remain, such as rising inflation, an aggressive Federal Reserve, higher oil prices and geopolitical tensions.
“While the Federal Reserve has assured investors that it remains committed to tackling inflation, it’s unlikely that the Fed’s tactics will be enough to lower inflation, which isn’t being driven by monetary oversupply, but instead by an undersupply of goods,” Stein said. “The central bank has little power to speed up the supply chain, which is at the root cause of the inflation we’ve seen.”
Charts: Yahoo!Finance sees a neutral commodity-channel-index pattern. Max pain stays at $137 with the same call mountain at $140.
There are two elements to the problem; huge demand, and constraint of supply. And while inflation is high as a result, it’s hard for me to see a stagnant economy coming out of all this. So what’s supposed to drive us into a recession?
And if the recession doesn’t materialize, what does that say about the stock market selloff of AAPL?
The word dumb comes to mind….
Joseph, are you old enough to remember “stagflation” in the ’70s and early ’80s? I sure am. What you get is continuing inflation that erodes buying power, and that produces economic stagnation as people fight to tread water. When we bought our first house, interest rates were 15% (VA!), so -a lot- of our money went to interest on the mortgage payment. Similarly, cars were more expensive because of the interest on the loan. It was particularly difficult to save money during that time.
I was on active duty ’78-’82. I could measure substantial decline in ‘real military compensation’, the magic number DoD used to evaluate pay and benefits, starting in 1976 when I was looking at what I’d make as a new 2LT. When I got out, I did get a salary bump, but as I said, that bump went to the mortgage.
I think I predate you by a good decade (76).
To your point: This is not by any means “stagflation”, which is my point. This is a world-wide economy stuttering back to life following a major pandemic, with all the mismatches between supply and demand you would expect. And since the last comparable pandemic was a century ago and it took place in s far different world, there are no comparisons.
Well, maybe coming out of a world war….
From the perspective of long term Apple investors the terms: advantageous; opportunistic; windfall; the gift that keeps giving; unbelievable; and the classic reason for buybacks are all terms that come to mind. The vision and strategic planning of Apple has taken innovation to a level that has joined the marketing of products, services, balance sheet, and FCF into the most popular brand on the planet. As well as the most shareholder efficient outfit of all, by looking at how other companies fall short by comparison.
Toss in the issuing of debt a few years ago when % rates were practically at zero, further amplifies the forward thinking from the bean counter division and IMO, that’s the Genesis for the term: “Hitting on all cylinders!”
Warren and Charlie have a track record of proven success through every business and economic cycle, and are still making gobs of money based on rational investments.
Cathie can go her unique way, but at the end of the day she couldn’t carry Warren’s cherry coke to the break room to share with Charlie’s See’s Candy!