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US Market Higher than Recent December Lows

By Vestact Market OverviewJan 10, 2019 11:00
US Market Higher than Recent December Lows
By Vestact   |  Jan 10, 2019 11:00
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Market Scorecard

Naspers is within a whisker of having a '3' in front of its price after closing 4.8% higher yesterday. The strong moves are thanks to a Tencent that is trending higher benefitting from the news that talks between the US and China are progressing well. Naspers hasn't been above R3 000 since early October last year. All this culminates in the JSE All-share now being green for the year. Long may it continue!

Yesterday the JSE All Share closed up 2.03%, the S&P 500 closed up 0.41%, and the Nasdaq closed up 0.87%.

Our 10c Worth

One thing, from Paul

The share price of Apple has pulled back sharply in recent months, so we are watching it closely. The all-time high was $232 per share on 3 October 2018. It got as low as $142 over the Christmas period but has since rallied to last night's close of $153.31. As we mentioned earlier this week, sales of the new models of iPhones have been a little disappointing, especially in China.

Keep in mind that Apple is the world's leading luxury consumer-goods company. It has wonderful profit margins and regularly reports record sales and earnings. It dominates the high-end personal computer market, as well as those for smartphones and digital watches. It never discounts its products and has raised prices in recent years. Its beautifully designed stores are tourist destinations. It has hundreds of millions of rich, repeat customers who are largely price-insensitive. As a result, it generates a mountain of cash every quarter.

Apple has used a good deal of that cash in recent years to buy back its own shares, as you can see from the chart below. Remaining shareholders like us benefit directly because it means that future profits are shared across a smaller base, and the earnings-per-share keep rising. I'm not sure, but I would imagine that the team in charge of buybacks has been busy this last ten days?

Amount spend on Apple buybacks
Amount spend on Apple buybacks

Michael's Musings

The market turbulence over the last 3-months has rocked some clients. One of the questions asked by clients is, "Why don't we sell now and then buy back when the market recovers?" It is a very valid question, but it has one massive assumption.

Selling now and buying back when the market recovers assume that you know when the bottom is, or at the very least 'sort-of' where the bottom is. Eddy in a recent Crossing Wall Street blog post, asked What If the Bear Market Is Already Over?.

The US market is already 10% higher than the recent December lows. What do you do now if you sold in December in anticipation of things going lower? Do you buy back in or do you wait and hope this bounce is temporary? Don't forget about all the costs and taxes involved with selling.

S&P500 Large Cap Index Chart
S&P500 Large Cap Index Chart

Signing off

Asian markets are slightly red this morning after Chinese data released was weaker than expected. The JSE All-share is also lower by 0.2% this morning. Local data out today is the manufacturing production number for November, and then in the US the Fed chairman, Jerome Powell, is speaking. The market is expecting very few rate hikes this year, with some analysts even calling for a drop in rates. We will have to see what sentiment Powell portrays this evening.

Original post

US Market Higher than Recent December Lows
US Market Higher than Recent December Lows

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