Zacks Investment Management

This week was packed with big tech news:

• We saw big tech names once again fuel the current bull market
• Amazon may not be the only factor impacting the retail apocalypse
• Facebook was hit this week with a $5 billion fine from the Federal Trade Commission

Read on to see how these stories and more will unfold, and how they could impact the market:

Big Tech Fuels the S&P’s 2019 Rally – It’s been a theme for much of the current bull market: the biggest technology companies have been outperforming during rallies, pulling the broad index higher. 2019 is no exception. Through last Friday, Microsoft, Apple, Amazon, and Facebook have delivered combined performance that accounts for 19% of the S&P 500’s total return for 2019. Big tech’s outperformance has helped boost equity investor returns for the year, but it also exposes weaknesses elsewhere in the stock market. Seven of the S&P 500’s eleven sectors are well below all-time highs, a signal that investors are comfortable paying a premium for rapid growth while often shunning solid and stable earnings. Because technology could arguably be labeled a “crowded trade,” it is increasingly important for investors to scrutinize earnings, in our view. Netflix recently disappointed with a rare decline in total subscribers, and Facebook was recently slapped with a $5 billion Federal Trade Commission fine as fallout from the Cambridge Analytica scandal. Eyes will be locked on Apple, which reports earnings on July 30.¹

Investors Flock into Bond Funds in Record Numbers – Even as U.S. equities continue to rally in 2019 and flirt with record highs, investors are also pouring into bond funds at record pace. For 28 consecutive weeks, there have been net inflows into bond mutual funds and bond ETFs – for a grand total of $254 billion of inflows so far in 2019. At this pace, bond inflows for 2019 could approach $500 billion, which is a staggering figure when knowing that the total over the last ten years was $1.7 trillion. Investors appear to be hedging against the possibility of an economic slowdown, as global economic data has noticeably softened over the past two quarters.²

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The Cause of the Retail Apocalypse Isn’t Just Amazon – The rise of Amazon has no doubt shifted consumer preferences and habits in such a dramatic way that malls across the country have been closing at a record pace. Brick and mortar stores have struggled to attract customers into stores as shopping online has become the default choice for many. But Amazon should not be solely blamed for the “retail apocalypse.” Rising rents are to blame, too. A high-profile example of rising rents was reported in The Wall Street Journal this week: Barneys New York reportedly is considering a bankruptcy filing in the face of a 72% rent bump at its Madison Avenue flagship store. On a national basis, commercial retail rents are off recent peaks, but they have not fallen as quickly as sales and revenue at national chains. This trend underscores how critical an ecommerce platform is to retail businesses in the modern economy.⁴

More Technology Scrutiny, Which Now Includes Antitrust Review – Technology companies have enjoyed a long period of little to no regulation and explosive growth, but the playing field may finally be shifting. Facebook was hit this week with a $5 billion fine from the Federal Trade Commission for the Cambridge Analytica scandal – and in a sign of doubling down on scrutiny, the Justice Department also announced it would be opening a broad antitrust review of some of the biggest names in tech, like Facebook, Google, Amazon, and Apple. At the heart of the review is whether these companies have too much dominance in search, retail, and social media, and whether their monetization of customer data violates privacy laws. Regulation and law-making is often a glacially slow process, so we would not expect any major changes coming down the pipe anytime soon.⁵

Just as we cannot predict exactly how these stories will pan out, we also cannot predict life’s uncertainties when it comes to retirement planning. No matter how carefully you prepare for retirement, life’s unknowns can throw your plans off track.

• The effects of inflation could diminish the real value of your nest egg
• A stock market correction or crash may cause your net worth to plummet
• Changes in your personal situation—such as a health emergency—could have an enormous impact on your nest egg

But you can take steps to prepare yourself and help protect your secure and comfortable retirement.

If you have $500,000 or more to invest, get our free guide, Retirement Uncertainties…and How to Breeze Through Them.⁶ It provides advice, based on our decades of experience, that we believe can help ensure that your golden years will be comfortable and secure.

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