(San Francisco)

A few weeks ago we were feeling very bearish about the new iPhone and suggested that we thought Apple’s stock might fall. However, we must now admit that we have had a change of heart. The incredibly poor sentiment that preceded the new iPhone’s release has been replaced with cautious optimism. Reviews of the newest suite of phones have been more positive than expected and this replacement cycle seems likely to be significantly better than previously expected. That, combined with the fact that Apple is not staggering release dates of the models this year, means that the stock could see some significant gains.

FINSUM: Everything seemed very gloomy prior to the new iPhone’s release, but that was the perfect environment for an upside surprise.

(New York)

Retail investors are fleeing the stock market, yet it keeps rising. What gives? Bernstein Research just studied this situation and had some interesting findings. Firstly, retail investors’ rotation of out stock funds and into bond funds has been the largest in history, with $1.1 tn flowing out of stocks and into bonds in the last 12 months. Secondly, they found that none of that really matters given the current state of markets, which are being driven by buybacks and M&A. Finally, they found that such outflows are usually a very bullish sign and they generally signal over-pessimism and have often been followed by great returns.

FINSUM: This seems like a very solid counter indicator that things might start turning more positive.

(New York)

While a lot of sentiment is starting to look more positive, Deutsche Bank has just come out with the exact opposite opinion. The bank has gone on the record warning that a recession will arrive very shortly, and that stock prices should be at least 13% lower than they are. The bank’s chief global strategist said, “We are cautious on stocks. We would argue you want to be defensively positioned [and] we would argue that the U.S. equity market has run way, way ahead of growth”. He continued “Every time payrolls growth has gone below 1%, the U.S. has ended up in recession. We would argue the U.S. economy is dangerously close to...tipping into recession”. US jobs growth is currently at 1.3% and slowing.

FINSUM: This is a really bearish outlook from an investment bank, which tend to trend towards over-bullishness. We question the valuation argument, but this is certainly a view worth noting.

(New York)

Most of this summer was dominated by the dual fears of a trade war and a recession. A weakening of underlying economic data backed up the view that we may be headed for a recession, and the long yield curve inversion only heightened those fears. However, new economic data is providing a pretty strong rebuttal to those ideas. The last four economic releases, including home sales, jobless claims and beyond, have all come back more strongly than forecast.

FINSUM: The economy never looked that bad, as it was mostly the yield curve and trade war that pushed fears of a downturn. Accordingly, we don’t think these recent data releases will have much of an effect one way or the other.

(New York)

Every advisor is likely already aware of the huge ruction that occurred in money markets this week. A number of short-term stresses sent over-night borrowing rates up to 10% this week before the Fed had to intervene to inject tens of billions of Dollars of liquidity to calm things down. Most media outlets have explained this as a number of cyclical short-term factors, without really giving any specifics. The whole episode has been curiously vague. This has led to an unusually fertile environment for rumors and speculation.

FINSUM: So our readers will know that we have been reporting for years, and we must say that this has been one of the oddest, mostly poorly reported, and vague events we have ever covered. None of the cited reasons of this money market flare up make much sense relative to the scale of money the Fed has pumped in. One of the best rumors we have heard is that there may be a bank failure coming. Just before this market flare up, oil jumped almost 20% in a day, its single largest one-day move ever. That kind of black swan event could easily destabilize a large financial institution if it was positioned the wrong way, and ultimately led to the kind of short-term funding desperation we saw before the last Crisis. This analysis is probably all wrong, but the situation must be taken seriously.