2018 ended with significant stock market turbulence around the world, especially in New York and Asia. Tembo made note of this in its final 2018 blogs and newsletter (you can sign up here). As we mentioned, significant drops in the DOW were reversed by announcements that major pension funds were pouring over $64 billion into stock buys, moving away from their positions on low yield bonds.
Apple CEO Tim Cook’s Investor Letters Causes Stock Market Jitters
Even as this news drove up confidence, the market tumbled again when Apple Co. CEO Tim Cook released a brisk letter to shareholders that stunned Wall Street and which the media called a ‘bombshell.’ The letter outlined many positive overall trends for the firm but admitted its revenues and profits were to be negatively affected by ongoing economic disruption. Sales of new Iphone devices, especially in Greater China, did not meet expectations, and gross revenue would be over 5% lower than forecast.
Apple’s reputation as a practically indestructible giant with an unrivalled brand and relentlessly improving financial performance was hurt badly by the letter. The company’s share price fell by 10%, equivalent to over $70 billion. As so many market participants, analysts, and traders have never experienced a bear market from a low interest rate boom that has lasted a decade, the tough news was not taken well. Markets negatively reacted to the news, with the letter solidifying growing perceptions that the global economy is undergoing significant structural changes.
Fed Tries To Calm Markets
This week some good data restored confidence. Another big boost to the markets came from Federal Reserve Chairman Jerome Powell, who commented that his central bank’s policy was ‘flexible’, essentially calming the market by saying the Fed would act if further market drops occurred. It’s Tembo’s belief that the Fed will cut rates quickly and print money to buy stocks if the stock or asset (real estate) market’s fell harshly – for better, or for worse.