Combo of Tim Cook, Jeff Bezos, Sundar Pichai
Getty Images (L) | Reuters (C) | Getty Images (R)
Financial markets enter August registering an array of extremes and at something of a "Now what?" moment.
The Nasdaq and gold at or just about at record highs, Treasury yields scraping all-time lows and the U.S. Dollar index sliding to a two-year trough, just as the bulk of earnings season is through, a tougher seasonal period arrives, and some excesses start to surface in investor behavior.
Some can't resist calling this an "Everything Rally" floated by a flagrantly easy Fed and cheapening of the dollar, but the action is more nuanced than that on careful review. Here are few things we learned last month that shape the set-up for the rest of the summer and beyond:
The issue now is just how much more can be asked of this stock cohort at this stage. Apple gained 10% Friday after its results but Amazon failed to rise even 4% and sits below its July high. A faint hint that most of the stupendous business performance is largely in these stocks by now? The Nasdaq 100, too, has surrendered a couple percentage points of outperformance versus the firm but range-bound S&P 500 over the past few weeks.
This group owes investors nothing after its run, the stocks are near 20-year valuation highs and last week there were signs of capitulation buying by holdouts after the Big Four CEOs survived tough Congressional hearings and the glittering earnings hit the tape.
The underpinnings of the Big Tech strength remain - and likely will unless bond yields surge or an economic acceleration seems underway but it's unclear if their two-week cooldown was enough to refresh this group for another sustained advance.
In this way, the market continues to act as if big-money investors are not overcommitted to equities, meaning there is no quick-triggered selling that would turn routine pullbacks into self-reinforcing slides.
For sure, the breadth of the market has not always been impressive, and of course the economy has backslid in recent weeks with the lapse of enhanced unemployment payments, Covid-case surges and resulting consumer caution.
But Friday was a good example of how traders must remain aware of "upside risks." Reports that Democrats and the White House would keep talking about a new fiscal deal this weekend were joined by others saying Microsoft might buy TikTok from its Chinese owner and private-equity firms are looking to acquire Kansas City Southern.
Individually not big market drivers but if we're in a phase where railroad leveraged buyouts, 11-figure tech deals and another round of fiscal juice are in play at once, it's tough to lean too heavily to the bearish side.
All of which sets the market up for some tests.
August begins what is easily been the toughest two-month stretch of the calendar for stocks, with higher volatility and weaker returns, on average. Election years have a particular tendency to get erratic in August, as this historical composite chart from Nautilus Research shows:
Of course, seasonal factors speak to broad tendencies over many years, but don't dictate an individual year's action. A separate study by LPL Financial of years when all four months from April through July were up for S&P 500, as this year has been, show above-average returns for the rest of those years (with the glaring exception of 2018, when a September market peak led to a 20% decline).
There is some froth building around the edges of the market for sure: The zero-commission retail speculators stampeding into moribund imaging company Kodak last week on news of a government loan; Special Purpose Acquisition Vehicles new shell companies set up to buy something are proliferating fast. Mostly this is the routine boundary-testing seen in bull markets, but it can get out of hand if the market keeps rewarding hubris too easily.
Another test could come from overstretched inter-market relationships. The persistent, steep slide in the US dollar mostly against the euro has been associated with firmer risk appetites and the run in gold. The dollar is getting oversold and sentiment is quite negative, possibly setting up a bounce that could ding stock prices.
It makes sense to enter August alert to all these interactions and the implicit bets embedded in share prices. But they don't yet amount to a convincing case to bet boldly against a market that has spent four months turning the doubts of bears into dollars for the bulls.
Read more:
- Stocks Close Higher With Amazon and Netflix Making Big Gains - Barron's - July 8th, 2020 [July 8th, 2020]
- Samsung needs a splashy product for its splashy product launch - The Verge - July 8th, 2020 [July 8th, 2020]
- Big Tech's Washington hearing will be a spectacle for the ages - Financial Post - July 8th, 2020 [July 8th, 2020]
- Dow gains more than 400 points after big tech rally, Amazon and Netflix hit records - CNBC - July 8th, 2020 [July 8th, 2020]
- Here Come the 4 Horsemen of the Techopolypse - The New York Times - July 8th, 2020 [July 8th, 2020]
- New records show 5,000+ contracts between big tech and the Pentagon - Business Insider - Business Insider - July 8th, 2020 [July 8th, 2020]
- Stock market rising on the indispensable companies - Minneapolis Star Tribune - July 12th, 2020 [July 12th, 2020]
- Tech Stocks Have Been the Markets Stars. Are They Overbought? - Barron's - July 12th, 2020 [July 12th, 2020]
- Tech Stocks Are Getting Scary. Why Theres No Way to Escape Them. - Barron's - July 12th, 2020 [July 12th, 2020]
- Big Tech companies have got universities in their sights - Telegraph.co.uk - July 12th, 2020 [July 12th, 2020]
- The National Research Cloud: Big Tech And Academic Research - Seeking Alpha - July 12th, 2020 [July 12th, 2020]
- Nasdaq At Record as Investors Bet on Big Tech to Weather Virus Storm; Dow Falls - Yahoo Finance - July 12th, 2020 [July 12th, 2020]
- Big Tech saved the day. We still dont trust them. - BetaBoston - July 12th, 2020 [July 12th, 2020]
- Big tech, even bigger heart, provides shields to Hatzalah - The Riverdale Press - July 12th, 2020 [July 12th, 2020]
- Cramer's earnings watch: 'If the banks get hammered, things could get ugly' - CNBC - July 13th, 2020 [July 13th, 2020]
- Big Tech joins fight against Trump's restrictions on international students - The Logic - July 13th, 2020 [July 13th, 2020]
- Pittsburgh Big tech companies are flocking to Pittsburgh. The foundation was laid over decades - Technical.ly Pittsburgh - Technical.ly - July 13th, 2020 [July 13th, 2020]
- Ask the Rational Investor: Is big tech too large? - Massillon Independent - July 13th, 2020 [July 13th, 2020]
- Big Tech went from growth stocks to Wall Street's Treasury bond substitute during the coronavirus - CNBC - July 13th, 2020 [July 13th, 2020]
- Thousands of contracts highlight quiet ties between Big Tech and U.S. military - NBC News - July 13th, 2020 [July 13th, 2020]
- The Information's Takeover Target List - The Information - July 18th, 2020 [July 18th, 2020]
- The Tension Between Competition and Tech Are Gaining Global Attention - JD Supra - July 18th, 2020 [July 18th, 2020]
- Cloudflare DNS goes down, taking a large piece of the internet with it - TechCrunch - July 19th, 2020 [July 19th, 2020]
- As the Revolving Door Swings - The American Prospect - July 19th, 2020 [July 19th, 2020]
- Big Tech is Poised to Pounce on Banking - Global Banking And Finance Review - July 19th, 2020 [July 19th, 2020]
- The Biggest Problem With Investing in Teladoc - The Motley Fool - July 19th, 2020 [July 19th, 2020]
- How Palantir and Peter Thiel might lead the biggest tech IPO of the year - Vox.com - July 19th, 2020 [July 19th, 2020]
- Here's what happened to the stock market on Monday - CNBC - July 19th, 2020 [July 19th, 2020]
- 'Big Tech' Pullback Explains Why Bitcoin Rally Has Paused in Q3 | NewsBTC - newsBTC - July 19th, 2020 [July 19th, 2020]
- Advertiser alliance, media companies, and Big Tech to collude and create a definition of hate speech - Reclaim The Net - July 19th, 2020 [July 19th, 2020]
- Congress has the legal power to investigate Silicon Valley. Let's make it count - The Guardian - July 19th, 2020 [July 19th, 2020]
- The Problem with Big Ideas (and Some Ramblings on Virtual Desktops & Tech's Blurred Lines) - www.waterstechnology.com - July 19th, 2020 [July 19th, 2020]
- Here are all the battlefronts TikTok is currently fighting on - KTVZ - July 19th, 2020 [July 19th, 2020]
- Exxon has topped North Texas' biggest-companies list for 3 decades. Now there's a challenger to the throne - The Dallas Morning News - July 19th, 2020 [July 19th, 2020]
- G20 Finance Officials Eye Solution to Digital Tax Row This Year - The New York Times - July 19th, 2020 [July 19th, 2020]
- Earnings and fiscal debate could be catalysts for stocks in the week ahead - CNBC - July 19th, 2020 [July 19th, 2020]
- Big Tech firms back suing Trump administration over rule that could drive out foreign students - Axios - July 19th, 2020 [July 19th, 2020]
- Big Techs latest reckoning is coming as it continues to rack up record valuations - MarketWatch - July 19th, 2020 [July 19th, 2020]
- Here's a new reason to invest in Europe - WICZ - July 21st, 2020 [July 21st, 2020]
- Recovery from Covid-19 will be threatened if we don't learn to control big tech - The Guardian - July 21st, 2020 [July 21st, 2020]
- Tech watchdog calls on Facebook Oversight Board members to demand real power or resign - TechCrunch - July 21st, 2020 [July 21st, 2020]
- Roku Is A Strong Gatekeeper In Streaming, But Could Be Crushed By Big Tech Analyst - Deadline - July 22nd, 2020 [July 22nd, 2020]
- The Conservative Inc. to Big Tech Pipeline - The American Conservative - July 22nd, 2020 [July 22nd, 2020]
- Are Facebook and Alexa really listening? 6 common tech myths debunked - USA TODAY - July 23rd, 2020 [July 23rd, 2020]
- New Emails Reveal Warm Relationship Between Kamala Harris And Big Tech - HuffPost - July 23rd, 2020 [July 23rd, 2020]
- Amazon-led rally boosts Jeff Bezos and Big tech"s billionaire boys - Proactive Investors USA & Canada - July 23rd, 2020 [July 23rd, 2020]
- Twitter CEO Jack Dorsey Invited To Testify In Congressional Big Tech Hearing - The Federalist - July 23rd, 2020 [July 23rd, 2020]
- EU-wide digital tax on big tech touted as best resource - EURACTIV - July 24th, 2020 [July 24th, 2020]
- Cramer says this tech stock rally is not like 1999 but here is what could stop it - CNBC - July 24th, 2020 [July 24th, 2020]
- Report Doorcast: Big Tech antitrust hearing preview and the Xbox Games Showcase breakdown - Report Door - July 24th, 2020 [July 24th, 2020]
- The one big thing each tech CEO will tell Congress - Axios - July 24th, 2020 [July 24th, 2020]
- Big Tech Unmasked as Anti-conservative by Project Veritas - Newsmax - July 24th, 2020 [July 24th, 2020]
- Antitrust Hearing Involving Apple Chief Tim Cook and Other Big Tech CEOs Reportedly Postponed - MacRumors - July 24th, 2020 [July 24th, 2020]
- Amazon To Invest In Reliance Retail: Is Big Tech Joining Hands To Conquer India? - Inc42 Media - July 26th, 2020 [July 26th, 2020]
- Zuckerberg, Bezos, other tech CEOs to testify at anti-trust hearing - Toronto Star - July 26th, 2020 [July 26th, 2020]
- Lily Allen says she feels sad and calls out big tech amid Wiley antisemitism row - The Independent - July 27th, 2020 [July 27th, 2020]
- Big Tech feels the heat from Washington and small agency leaders dish: Tuesday Wake-Up Call - AdAge.com - July 27th, 2020 [July 27th, 2020]
- Overzealous government officials should stay out of big tech's way - Washington Times - July 27th, 2020 [July 27th, 2020]
- Mint Lite | India covid tally, protests across globe, big tech CEOs & other news - Livemint - July 27th, 2020 [July 27th, 2020]
- Big tech antitrust probe report from US Congress likely by early fall - Times Now - July 27th, 2020 [July 27th, 2020]
- Antitrust Hearing Involving Apple Chief Tim Cook and Other Big Tech CEOs Reportedly Postponed [Update:... - MacRumors - July 27th, 2020 [July 27th, 2020]
- Congressional antitrust probe of Big Tech expected by early fall - The Globe and Mail - July 27th, 2020 [July 27th, 2020]
- Big Tech chiefs get brief reprieve from govt hearing into their growing power - ARNnet - July 27th, 2020 [July 27th, 2020]
- Lawmakers keen to break up 'big tech' like Amazon and Google need to realize the world has changed a lot since Microsoft and Standard Oil - Fairfield... - July 29th, 2020 [July 29th, 2020]
- Stock futures are flat ahead of Fed decision and Big Tech testimony - CNBC - July 29th, 2020 [July 29th, 2020]
- Ahead of hearing with big tech CEOs, Cicilline says a Biden presidency would lead to regulation next year - Yahoo News - July 29th, 2020 [July 29th, 2020]
- Democrats hurt small business when they attack Big Tech | TheHill - The Hill - July 29th, 2020 [July 29th, 2020]
- Tech leads stocks higher as CEOs testify and Fed keeps rates near zero - Fox Business - July 29th, 2020 [July 29th, 2020]
- WATCH LIVE: Heads Of Amazon, Apple, Facebook And Google Testify On Big Tech's Power - NPR - July 29th, 2020 [July 29th, 2020]
- Big Tech to Testify: What Jim Cramer Is Watching - TheStreet - July 29th, 2020 [July 29th, 2020]
- Apple, Google, Amazon, other Big Tech companies have a climate problem; now being forced to clean up - Firstpost - July 29th, 2020 [July 29th, 2020]
- Commentary: Big Tech is engaged in a hostile takeover of our country - TheBlaze.com - July 29th, 2020 [July 29th, 2020]
- Slog AM: Big Tech's Anti-Trust Hearing, COVID-19 Goes to College, Boeing Is Boned - TheStranger.com - July 29th, 2020 [July 29th, 2020]
- Big tech antitrust probe report from Congress likely by early fall - Reuters - July 30th, 2020 [July 30th, 2020]
- Vergecast: Big Tech antitrust hearing preview and the Xbox Games Showcase breakdown - The Verge - July 30th, 2020 [July 30th, 2020]
- Biased Big Tech algorithms limit our lives and choices. Stop the online discrimination. - USA TODAY - July 30th, 2020 [July 30th, 2020]
- Big 5 Tech Stocks Have Trounced the Market. So Have Their Fundamentals. - Barron's - July 30th, 2020 [July 30th, 2020]
- Top antitrust Democrat opens hearing by comparing big tech firms to past monopolies | TheHill - The Hill - July 30th, 2020 [July 30th, 2020]
- Big Tech antitrust hearing could be colossal or mere theater - Roll Call - July 30th, 2020 [July 30th, 2020]
- Stop with the egg metaphor in discussing Big Tech break-ups | TheHill - The Hill - July 30th, 2020 [July 30th, 2020]