Apple, Inc. stunned Wall Street last week when the company issued a rare cut to its revenue forecast for the upcoming quarter \u2013 the first time it has slashed expectations in more than 15 years. Markets don\u2019t like downward earnings revisions, and no exception was made for Apple. The stock fell some -10% in the following day\u2019s trading session.<\/p>\n
In a statement, Apple essentially blamed most of its revenue revision on sluggish iPhone sales in \u201cGreater China,\u201d which made many market watchers\u2019 heads spin. Many were already fearful of the impact of an ongoing trade war between China and the U.S., and Apple\u2019s news seemingly moved investors to posture for the worst-case scenario: no trade deal with China, increased probability of a global recession.1<\/sup><\/p>\n __________________________________________________________________________<\/p>\n Don\u2019t let market fears prevent you from seeing strong economic fundamentals<\/u><\/strong><\/a><\/p>\n There is no doubt that times are volatile and investor sentiment is mirroring this. But I suggest avoiding the urge to get caught up in these sentiments, and instead focus on the facts \u2013 economic data releases, earnings reports, and other economic factors!<\/p>\n To help you do this, we are offering all readers a look into our just-released\u00a0Stock Market Outlook report.<\/strong><\/p>\n This report will provide you with our forecasts along with additional factors to consider:<\/p>\n If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today!<\/p>\n IT’S FREE. Download the Just-Released Stock Market Outlook2\u00a0<\/sup><\/u><\/strong><\/a><\/p>\n ______________________________________________________________________________<\/p>\n To be fair, data across the board does suggest weakening (but not outright contractionary) economic fundamentals in China. Walking through these Chinese economic data points one by one is not necessarily a reassuring exercise:<\/p>\n At face value, the data doesn\u2019t look great. But here\u2019s the kicker: For all this slowing in economic data readings, economists still expect China\u2019s economy to grew 6.4% in the fourth quarter. <\/em>This growth rate marks a deceleration from Q3, but it\u2019s less alarming when you consider that Q3\u2019s growth rate was 6.5%. In my view, investors are too often erroneously conflating \u201cslowing\u201d growth with negative growth. They are not the same thing.4<\/sup> \u00a0<\/em><\/p>\n My take from 30,000 feet is this: We\u2019re seeing quite a bit of worst-case, negative growth scenarios being priced-into stocks, which to me opens the door for a positive surprise. And markets like positive surprises.<\/p>\n Eyeing Trade Talks<\/strong><\/p>\n One area where I think we could be poised for a positive surprise is in trade. U.S. trade representatives, led by Robert Lighthizer, arrived in Beijing last week to push strongly for negotiations. On the table are issues over Chinese tariffs, the forced transfer of technology from American businesses doing business in China, and Chinese state subsidies to companies which create unfair competition. Lighthizer\u2019s primary focus is on these structural trade issues.<\/p>\n On the other hand, because of President Trump\u2019s fixation on trade deficits, Treasury Secretary Steve Mnuchin has a different goal of getting concessions from China to purchase more American goods, such as agriculture products and use of U.S. banking, brokerage, and insurance products and services. Lighthizer and Mnuchin\u2019s goals are not necessarily in conflict, but they\u2019re also not necessarily a unified front. It will be interesting to see how China works both lanes of demands.5<\/sup><\/p>\n To date, we\u2019ve already seen some signs of small victories and Chinese concession. China recently removed punitive tariffs on US-made cars and auto parts, and they also upped purchases of American soybeans. Also, just last week, China agreed to approve the import of five new varieties of GMO (genetically modified) crop seeds, which the U.S. \u2013 the world\u2019s largest producer of GMO crops \u2013 has been working to achieve for years.6<\/sup><\/p>\n These small breakthroughs, along with encouraging rhetoric from both sides, have arguably offered the equity market a glimmer of hope that a breakthrough is near. At this stage, with economic and political pressure mounting on both sides of the table, there\u2019s a strong case that both countries are eager to arrive at a deal. Time will tell, but we see a positive surprise on the horizon.<\/p>\n Bottom Line for Investors<\/strong><\/p>\n For Apple, the revenue issues may run a bit deeper than just a simple, linear connection between a slowing China and slowing sales. Global iPhone sales have been stagnant, and Apple\u2019s share of the Chinese smartphone market has been troublingly falling \u2013 from 12.5% in 2015 down to 7.8% in Q3 2018. These company-specific revenue trends matter, but they are also not perfect indicators of the broader macroeconomic trends.7<\/sup><\/p>\n What the market wants today, in my view, is some kind of deal and de-escalation between the world\u2019s biggest and second biggest economies. If that \u2018fear\u2019 fades, which I think it will, the market should respond positively.<\/p>\n In the meantime, I suggest focusing on the fundamentals instead of the daily price movements, I am offering all readers our\u00a0Just-Released Stock Market Outlook Report.<\/u><\/strong><\/a><\/p>\n This Special Report is packed with newly revised predictions that can help you base your next investment move on hard data. For example, you’ll discover Zacks\u2019 view on:<\/p>\n If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today!<\/p>\n\n
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