Big Tech booming, investors seek bonds, more retail woes
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
How Can You Prepare for Retirement Uncertainties?
There are so many unknowns that come with planning your retirement – what if the market crashes or a medical emergency arises? No one can predict if these what-ifs will materialize—but there are simple steps you can take NOW to help ensure your secure and comfortable retirement.
Get our practical advice that is based on decades of experience and can potentially guard your retirement assets against the “what ifs” in life, including:
- How to counteract the effects of rising inflation
- Ideas to allocate your assets to defend against a correction or crash
- Strategies to deal with financial emergencies without liquidating investments
- Tax planning ideas to help avoid unpleasant surprises
- Plus more ways to help protect yourself and your family against retirement unknowns
If you have $500,000 or more to invest, download our Retirement Uncertainties…and How to Breeze Through.3 ________________________________________________________________________
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.
2 The Wall Street Journal, July 25, 2019. https://www.wsj.com/articles/investors-pour-money-into-bond-funds-at-a-record-pace-11564056000?mod=hp_lead_pos8
3 ZIM may amend or rescind the “Retirement Uncertainties…and How to Breeze Through Them” guide for any reason and at ZIM’s discretion.
4 The Wall Street Journal, July 21, 2019. https://www.wsj.com/articles/with-so-many-vacant-stores-e-commerce-is-only-part-of-the-problem-11563710401?mod=djem10point
5 The Wall Street Journal, July 23, 2019. https://www.wsj.com/articles/justice-department-to-open-broad-new-antitrust-review-of-big-tech-companies-11563914235?mod=djem10point
6 ZIM may amend or rescind the “Retirement Uncertainties…and How to Breeze Through Them” guide for any reason and at ZIM’s discretion.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.
Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts as an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.
This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney-client relationship. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole.
Any projections, targets, or estimates in this report are forward looking statements and are based on the firm’s research, analysis, and assumptions. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. All expressions of opinions are subject to change without notice. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed in this presentation.
Certain economic and market information contained herein has been obtained from published sources prepared by other parties. Zacks Investment Management does not assume any responsibility for the accuracy or completeness of such information. Further, no third party has assumed responsibility for independently verifying the information contained herein and accordingly no such persons make any representations with respect to the accuracy, completeness or reasonableness of the information provided herein. Unless otherwise indicated, market analysis and conclusions are based upon opinions or assumptions that Zacks Investment Management considers to be reasonable.
Any investment inherently involves a high degree of risk, beyond any specific risks discussed herein.
It is not possible to invest directly in an index. Investors pursuing a strategy similar to an index may experience higher or lower returns, which will be reduced by fees and expenses.
The S&P 500 Index is a well-known, unmanaged index of the prices of 500 large-company common stocks, mainly blue-chip stocks, selected by Standard & Poor’s. The S&P 500 Index assumes reinvestment of dividends but does not reflect advisory fees. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor. An investor cannot invest directly in an index.