Wednesday, September 20, 2017

Tech Volatility to Ignore, and Some to Respect...

The following essentially serves as a good example of market myopia. I.e., how short-term trading can shake up stock prices and, alas, have an unsuspecting long-term investor wondering or, worse yet, acting.

Question: If you were in the market for a new smart phone, and you happen to be an iPhoner, would you jump all over the 8 with its attendant contract for $699, or would you wait a couple of months for the X (google it if you don't already have the specs) and pay $999?

In light of today's selloff of all things Apple on news that iPhone 8 pre-orders have been underwhelming, I sent the following to our in-house (among other things) tech guru Nick:
I wonder if the pending X gets in the way of 8 sales??
His reply:
Yes, definitely! It's not that much more expensive. Everyone I've talked to says they're getting the X.
Again, Apple's trading markedly lower today, as is a number of its component/tech suppliers, apparently on the news that iPhone 8 pre-orders are notably fewer than previous models at this juncture (the beginning of the selloff coincided with the news release). Even the ETF that tracks lithium miners is off 2.4% as I type -- and, clearly, they've got a lot going on in addition to cell phone batteries.

To the extent that Apple's news is affecting our tech exposure today (it's the biggest component), which is off 0.6% (XLK), it's volatility to ignore. Our macro view, however, that leans toward a higher-trending dollar going forward amid higher interest rates, is a legitimate headwind for tech, hence our recent lowering of our target to the sector.

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