Fundamentals

$3 trillion market cap is a whole load of market cap and yet, APPL, is a stock that just goes up; up and up it goes, fuelled by momentum, price blind algorithms and retail buying that has made it all but a one-way trade. Active money, put off by a near pink-in-the-face multiple and negative earnings, gazes on, slack-jawed hoping valuation does, at some point, matter. And there’s hope. As fundamentals start to fray at the edges analysts have quietly been pulling back forecasts. Goldman Sachs, notably, the latest to do so poked, perhaps, by Foxconn’s recent gloomy guidance and comments that “the pandemic-spurred high growth period has come to and end”. Foxconn puts together about 70% of all iPhones. Much has been written about the shape of the market’s bear-defying pimp higher YTD, led by a narrow cut of stocks, of which APPL is just one. And yet, with the top ten names of the S&P muscling up to more than 30% of the index, as selected stocks have smashed through all-time hights, their earnings contribution has collapsed. Like APPL. See a recent note from JP Morgan for details, but the beef seems to suggest the recent run is going to come under some heat into the second half of the year. More so when readings of tech stock sentiment relative to the market sit at the highest level in twenty-three years. “When all the experts and forecasts agree, something else is going to happen” so said Wall Street legend Bob, good-for-a-quote, Farrell. Hmm. Tick, tock. Tick, tock. In other news, for those flicking between Sky Sports and RT – the ever so slightly one-eyed state controlled Russian TV network – events at Headingly were potentially put into perspective last week, with a meaty announcement that the BRICs were indeed planning to introduce a new trading currency backed by gold at the upcoming August pow-wow. This had previously been a suggestion that had only been made by gold bugs, late at night, eyes glazed and breath stinking of bourbon; and whilst it was made by state controlled Russian TV so should perhaps carry the same weight, it’s a story that won’t go away. Who knows. Also last week: Japan. For those getting a little tight over the inflationary pulse in Japan and the potential for a ruckus in the Yen, last week’s nominal wage data was another holy moly. If you missed it, the data came in hot. Hot, hot, hot, ushering in a potential ‘Ay caramba’ moment for those loose-limbed money men at the Bank of Japan. Mind the eye.