Bears are at a loss after the S&P 500 closed at an all-time high last Friday. The return to highs not seen since January 2022 is a milestone. The broader market owes the rally to the Nasdaq Composite Index, which gained 1.70% on the day.
Apple (AAPL) is the stock to watch. The iPhone giant launched an expensive Apple Vision Pro. Unfortunately, major firms are snubbing the headset. Alphabet’s (GOOG) YouTube, Spotify (SPOT), and Netflix (NFLX) are not supporting apps for it.
Apple needs broad app support to gain appeal. Without it, consumers are unlikely to pay the premium price when it has limited use. It forces Apple to develop custom VR-ready applications at a considerable expense.
Multiples Expand
The S&P 500’s rally expanded the price-to-earnings multiples. It increases the risk of stretched valuations leading to a correction. The market rally is dependent on excessively bullish sentiment. Value investors may pivot to cheaper stocks to hedge their bets. However, this strategy may not work well.
As long as investors avoid the inexpensive China technology stocks, they should avoid losses should markets lose momentum. China tech stocks are cheap because the country is in a steepening recession. The less followed stocks like Joyy Inc. (YY), Bilibili (BILI), and Weibo (WB) are examples of companies showing the struggles of weak business conditions in China.
