Dear Towerpoint,


The first week of 2019 has been a searing one on Wall Street, as a confluence of issues continue to worry traders, including the China-US trade war, China's stuttering economy, the US government shutdown, and Brexit. None of these themes should come as a surprise to readers of Trending Today (or any financial news source, for that matter), as they have been recurring since the bear market began in October. The surprise came on Wednesday morning, when Apple cut its quarterly revenue forecast for the first time since 2007 and announced their 2018 holiday quarter sales figures had turned out worse than expected, blaming weak iPhone sales in China (which represent 20% of Apple's revenue).


Many consider this the darkest day in the iPhone era for the technology behemoth, and the market reacted accordingly, with Apple shares tanking 10% following the announcement, to close at the lowest level since April of 2017.


Apple's decline has been sudden. As recently as August, it became the first $1 trillion U.S. company, but then a rapid changing of the guard took place. Today, Apple now trails its main technology rivals Microsoft, Amazon, and Alphabet (Google) in market capitalization.




What is unclear is whether this is a problem particular to Apple, or whether China's slowing economy will affect other American companies as well, specifically other tech giants and the Detroit automakers. However, we are inclined to take the long view: The Chinese trade war will not last forever; economies always ebb and flow; the value of the US dollar does not always rise, and, perhaps most importantly, with an installed base of 750 million active iPhone users worldwide, and 350 million of those potentially upgrading over the next 12 to 18 months, things may not be so gloomy for longer-term Apple investors. We believe the same can be said for the US economy and financial markets.


Before today's big rebound, the broader market experienced a peak to trough decline of close to 20%, for a myriad of reasons we have previously discussed. And with the S&P 500 down 2.35% through just two trading days into the year, the US equity market is off to its worst two-day start since 2000. It is also just the sixth time in the index's history that it has seen a decline of 2% or more in the first two trading days of the year.


Further volatility seems to be a reasonable expectation for the foreseeable future, and whether Apple recovers, and if so, how quickly, remains to be seen. But within this storyline lies an important lesson that we believe investors cannot internalize quickly enough: Just because a company is "blue-chip" does not mean it will behave like a blue-chip, supporting the wisdom that one must properly diversify and spread risk. While losses and missed opportunities will always be part of an investor's journey as they build and protect their portfolio and net worth, success is defined by not only how they endure and shake off these setbacks, but also the discipline and guts they exhibit when working to reverse them. Hint: Buying low and selling high helps to speed this process. 




The Apple saga was just one of a myriad of stories that populated the 24/7 news cycle over the past two weeks:

Locally, we were fortunate enough to have Sam Stovall, Chief Investment Strategist of U.S. Equity Strategy at the renown research firm CFRA, join us for our most recent Investment Committee (IC) meeting. We were honored to spend an hour gleaning insights into his current outlook for the US and global economy and financial markets, and aim to include guests of his stature regularly at our Towerpoint Wealth IC meetings. Click HERE to read more.




Lastly, we encourage you to take three or four minutes to review the curated content found below, highlighted by:

  • An article written by Towerpoint Wealth's President, Joseph Eschleman, about year-end giving and its economic and organizational benefits, published in the November 15, 2018 issue of the Sacramento Business Journal.
  • Towerpoint Wealth's December, 2018 Monthly Market Lookback: The Point of No Return.
  • An excellent two-minute video on why you should not panic when the stock market tanks.

The fact remains: The world is a very complicated place, and we encourage you to call (916-405-9140), email (info@towerpointwealth.com), or Tweet (@twrpointwealth) with any concerns, questions, or needs you have. We continue to be here for you, and look forward to connecting with, helping, and being a direct, fully independent, and objective expert financial resource for you.


- Joseph, Jonathan, and the entire Towerpoint Wealth team


 
 
 
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