Stocks had a mixed close yesterday as tech stocks continued to slump in response to recent gains in bond yields. The Reserve Bank of New Zealand hiked rates overnight in a move to tackle its 4.9% inflation… US investors eagerly await today’s inflation number.
N O T E W O R T H Y
Going cold turkey. Have you noticed your favorite tech stocks in the past few days? No? Maybe, you recently bought some fast-moving growth stock, hoping to catch the next wave up, only to realize that fast moving stocks can move in… well, both directions. Going back to your favorite big tech stocks. You are probably of the mindset that those just always go up, and they do… mostly… depending on your perspective, of course. I track the firm’s top 20 holdings on a weekly basis, a portfolio that I named the Siebert Superlative 20. Wouldn’t you know it, the top few spots are always dominated by the usual suspects: Apple, Microsoft, and Google/Alphabet. I am sure that you are not surprised by this admission. You are probably thinking, “of course they top the list, everyone buys those stocks day in and day out.” You may be partially correct, but I follow this list over time, so I have a bit more insight into how these chart-toppers attained their lofty perches. To understand my view, we need to turn the clock back a few years — let’s say to 2007.
Beyonce was at the top of the pop music charts while Kenny Chesney and Tim McGraw were neck and neck at the top of the country music charts. American Idol topped the TV lineup for the year… it was already in its 6th season (Jordin Sparks won). George W. Bush was in his second term in the White House. The year’s top grossing film was Pirates of the Caribbean: At World’s End. The 5th Harry Potter Film (Order of the Pheonix) took the second spot. In that same year, the final Harry Potter book (Deathly Hallows) was released. In sports, The San Antonio Spurs won the NBA title, the Indianapolis Colts won Super Bowl XLI, Manchester United took the top spot in the Premier League (Cristiano Ronaldo scored 31 goals… he is now back on the team after 13 years, playing for Real Madrid and Juventus), the Boston Red Socks won the World Series, Carl Edwards won the NASCAR Busch Series, and Kimi Räikkönen won the Formula 1 WDC. Remember the year now? My kids, now grownups, were 12 and 9 years old! It was 2 dogs ago for my family. I weighed less without dieting. Oh, I might have forgotten to mention that Apple announced a new product in January of that year… the iPhone.
I am sure that you remember when the iPhone came out. Most of us had tiny flip phones and text messaging was near impossible, mostly used by kids. If you were a gadget person, you would be carrying an iPod, a Blackberry, and maybe a Motorola RAZR. When Steve Jobs announced a touch screen phone that allowed you to play music, email, text, AND TAKE PICTURES… well, many scoffed. Let’s say that you decided to buy Apple’s stock that year. You know where this is going? Yep, the stock has risen by +5093% since then. Microsoft, at the time might have appeared to be a safer bet with its lion’s share of the PC market. If you decided to go with Bill Gates, you would have racked in some +1049%. Not too bad. Google, at the time just a search engine company, it has netted investors somewhere around +1145% since. A handsome return, wouldn’t you say? The S&P500 returned around +230% during that same period. Oh, and Berkshire Hathaway is also in the Siebert Superlative 20. Holding Buffet’s stock for that period would have returned around +300%.
Ok, so here we go. THOSE FANTASTIC GAINS DID NOT HAPPEN IN A STRAIGHT LINE. In fact, quite a bit has happened since that iPhone was announced. There were 2 recessions, 1 mortgage crisis, a global financial crisis, Facebook/Meta, Twitter, Bitcoin, electronic vehicles, Obama, Trump, Biden, wildfires, Brexit, a European debt crisis, a US debt downgrade, and many market corrections. Inflation reared its head a few times over the period hitting 5.6% in 2008, 3.9% in 2011, and 6.2% last month. Fed Funds were at 5.25% when the iPhone was announced. The Fed would aggressively cut rates between the summer of that year to just about 0% in 2008. In late 2015, the Fed began to raise rates and it continued to do so through the summer of 2019 when it made a downward adjustment, only to cut the funds rate to 0% at the beginning of the pandemic. The Fed also conducted a bond purchase taper in 2013 and just began another one this month. Despite this and with many diversions, Apple still managed to return +5093%. BUT NOT FOR EVERYONE. If you bought APPLE early in 2007, you would have enjoyed a nice move up through the end of the year. In 2008 you would have suffered a -40% draw down and another -54% draw down. There were other big draw downs, -44% in 2012/2013, -31% in 2015/2016, and -39% in 2018, to name just a few. If you were short-sighted, you might have sold in those pull backs. Some were. Those folks most likely sold at the lows, bought back in near highs, sold at the next pullback, and bought back near the next high, and so on. So why is Apple at the top of the Siebert Superlative 20? Because long-term focused investors held on to the stock despite the ups, downs, interest rate cuts, interest rate hikes, recessions, etc. Apple has created great wealth for its investors. It is important to note that Apple is a fantastic company and has remained at the cutting edge through that time period. Not all companies made it through that period the way Apple, Microsoft, and Google did, and there are no guarantees that they will continue to dominate in the future. If you did your homework and maintained your long-term focus, you would be in that owner’s group on the top of my Siebert Superlative 20. I would love to see you there – do your diligence and stay focused on the long-term.
Stocks had a mixed close yesterday as rising interest rates put pressure on growth stocks for a second day. The S&P500 gained +0.17%, the Dow Jones Industrial Average added +0.55%, the Nasdaq Composite dropped by -0.5%, the Russell 2000 gave up -0.15%, and the S&P500 ESG Index climbed by +0.21%. Bonds slipped and 10-year Treasury yields rose by +4 basis points to 1.66%. Cryptos gained +5.09% and Bitcoin rose by +2.54%.
- Initial Jobless Claims (Nov 20) came in at 199k, below expectations and lower than last week’s 268k.
- GDP (Q3) was revised down slightly from +2.2%.
- Durable Goods Orders (Oct) fell by -0.5%, missing estimates, after falling by a revised -0.4% in the prior period.
- PCE Deflator (Oct) may have increased to +5.1% from last month’s +4.4%. This is the Fed’s favorite inflation gauge.
- University of Michigan Sentiment (Nov) is expected to come in at 66.9, slightly higher than earlier estimates.
- New Home Sales (Oct) are expected to be flat after rising by +14.0% in September.
- FOMC meeting Minutes from their November 3rd meeting will be released this afternoon at 2:00 PM EST.
- Normal market hours today, closed tomorrow for Thanksgiving, and early close on Friday. Check back in on Monday for calendars and details for the upcoming week.
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