As Apple’s Q4 earnings results fell short and iPhone sales start shrinking as the company’s new line-up is not performing as well as expected, Christopher Dembik, Head of Macro Analysis at Saxo Bank said:

“Last night’s results beg the question, are investors falling out of love with Apple? The results of the former favourite stock – Apple was the fifth most traded stock by clients at Saxo Bank, behind Facebook, Amazon, Alibaba and Tesla – signalling a tough climate for traders right now with a gloomy global economy, weak returns across the board and whispers of another recession on the way.

Following the 9.2% decline of the S&P 500 in December, which caused many equity traders to become a bit nervous about the market, our main message during this period is to maintain a defensive strategy, favouring minimum volatility factor over pure equity exposure. Since January, the US market’s PE ratio has fallen to 15.4 times, which is a healthier level. And, since October’s correction, the S&P 500 is less dependent on the performance of the FAANGN tech stocks. We believe earnings growth will be back down in single digits at around 6% in the coming period, but it is still a honourable performance after years of very strong earnings.

Looking at historical records of equities performance we can see that consumer staples stocks have held up best out of any sector during hard times, the logic being that these companies are going to continue to perform as consumers will continue to need to purchase their products regardless of a recession. And the data shows the truth in this theory. During the 1995 dot-com crash, the consumer staples sub-index was +28% in comparison to the S&P 500 which was -34%.  Again, during the global financial crisis, the same sub-index was +6% versus -25% for the S&P 500.” 

by Bill Boyle
IBS Intelligence Senior Editor
imp-loader
preloader