Will This Be the “Biggest” Week the Market Has Seen in Years?

Bill Poulos is a published author who writes about the stock market, finance related topics, and the economy. He was a high-level executive for General Motors for 35 years. When he retired in 2001, Bill and his son, Gregory Poulos, co-founded Profits Run, Inc. The company educates individuals on making wise investments while reducing risks. Profits Run provides articles, software, videos, and offers coaching to improve traders wealth management practices. Bill resides in Wixom, Michigan with his wife, Karen. Read below as Bill Poulos discusses the implications of this week’s stock market trades.

Profits Run Federal Reserve
Profits Run Federal Reserve
“When the market starts counting its chickens before they’ve hatched, it can be even more damaging.” — Bill Poulos

After the market slipped earlier today, it would seem as though stocks were not ready for their new all-time highs. The price of Apple shares fell after the 4th of July break, heading off a sector-wide flounder.

And chances are that if you’ve been paying attention, you’ve seen the repercussions when tech stocks waver.

Typically, the entire market does well.

It’s simple to understand why it happens, even if it does seem sort-of “knee-jerk” in nature.

Tech has been the major driving force for the post-2008 bull run, after all.

Much of the drama in this case was caused by a devaluing from a Rosenblatt Securities analyst in this case. By lowering their outlook on AAPL from “neutral” to “sell”, they sent shareholders into a kind of panic at the open.

AAPL has fallen nearly 2% as of midday, pulling the S&P (-0.60%) and the Dow (-0.50%) along with it.

Apple’s slowed iPhone sales is likely the source of Rosenblatt’s analysts’ worry regarding a “fundamental deterioration over the next 6 to 12 months.” Trouble could be brewing for CEO Tim Cook, if they can’t get their other divisions firing on all cylinders.

Getting away from iPhone dependency is Apple’s integral mission for the next few years. Though things really haven’t worked out as planned so far. Lest we forget it was only a few weeks ago that Apple presented a $999 computer stand, resulting in eye-rolls a-plenty from the conference audience.

According to Cook & Co, Apple’s cult following will buy pretty much anything with the Apple logo on it. It seems the company is ready to test just how much people will spend with this latest offering.

Even for an overengineered, overpriced piece of hardware.

But investors are walking on eggshells for other reasons, too. Following the temporary trade war truce and a healthy jobs report, Fed Chairman Jerome Powell is anticipated to testify on Wednesday, which could postpone an interest rate cut.

Peter Cardillo, chief market economist for Spartan Capital Securities said, “Friday’s employment data took the market by surprise. That dampens the prospects of the Fed acting.”

“They will have to collect further evidence.”

And the bulls only get more nervous the more time is spent “collecting evidence”. If rates aren’t cut in July, investors could lose the reward of a summer rally due to the ensuing sell-offs.

A fear that many of the benefits of the rate cut have already been priced into stocks is felt by many investors. Should the cut be held off until August (or worse, cancelled altogether), the market could rapidly recall those gains.

Conceivably resulting in a fall correction.

Because right now, investors want all of it.

They want the Fed to slash rates again and again AND still have a strong economy. Though in all likelihood they’re only going to get one (or possibly even none) of those things, and the other may counteract much of the market’s gains.

It’s a financially and emotionally dangerous game to get your hopes up as investors have done since June.

Anyone’s portfolio can be compromised by overconfidence. And when the market starts counting its chickens before they’ve hatched, it can be even more damaging.

The evidence we’re seeing so far is serving as proof. If Powell fails to say the right things come Wednesday, we could be in for a serious crunch.

Ironically, that may mean that the economy is actually stronger than we expected.

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