As my friends know, I am a big fan of trivia questions, so on this pre-holiday Friday I will lead with one: Which is older, the current bull market or Betty White?
Today is Betty White's 98th birthday, so she is slightly older than this run, which technically only began last February, as bear market conditions were activated in December 2018's plunge. However, if you want to take a higher-level view and note that U.S. markets have been in a pronounced uptrend since March 2009, I will not argue with you.
So, we are more than a decade in and the signs of a U.S. recession, with the exception of some stubborn flatness in the Treasury yield curve, are not obvious.
While stock market declines tend to coincide with recessions, my experience shows that the market is more of a leading indicator than a coincident one. If there is one thing that could send the Trump Train off the rails and derail this fabulous economy, it is a short, sharp shock from stocks.
A 2008-style crash seems extremely unlikely, especially with the Fed showering Wall Street with money via its "not QE4" repo program -- much to the benefit of Jamie Dimon and JPMorgan Chase (JPM) and James Gorman and Morgan Stanley (MS) .
No, the real worry, if there is anyone out there that still knows how to worry, is a 2000-style tech bubble bursting. With the S&P 500's price/sales, EV/EBITDA and, as of this week, P/E ratios all at levels not seen since 2000, that is a real concern.
If you go back and look for a one sentence "this is it" cause of the tech bubble bursting, you won't find it. It was a Minsky Moment, a one-way trade that imploded against itself.
If there was anything close to a cassus belli, it was weakness in second-quarter 2000 earnings from the tech titans of the day. Again, there wasn't one signature blow-up, just a general feeling that "hey, earnings growth cannot justify these multiples." Fast forward to January 2020, and we are seeing the same phenomenon.
So, what could cause the Minsky Moment in 2020?
An oil price shock caused by a geopolitical event is a possibility, but it does seem that tensions between the U.S. and Iran have dissipated.
Impeachment? Seems like a total non-issue to me.
The only factor that is left is the only one that should matter to those interested in valuation: corporate earnings! This market has shown the ability to shrug off any bad news and spin negatives into positives, but earnings misses are harder to ignore.
I am a dedicated shopper and RedCard holder at Target (TGT) , but the company's pre-announced fourth quarter same-store sales figures were horrible. Of course, the market rose that day.
So, if Target is a bellwether of a slowing U.S. consumer, that would put the spotlight directly on Amazon (AMZN) . Amazon shares have lagged the Nasdaq over the past year after an amazing run in the prior five. Did Jeff Bezos have a good Christmas? He had better have, or AMZN shares are headed back to $1,500.
Ditto for Tim Cook and Apple (AAPL) . This company has produced no meaningful growth in iPhone shipments (a figure it no longer reports) for the past four years.
The market has bid up Apple shares in anticipation of strong growth from Services (including the recently launched Apple TV+) and ancillary products (AirPods, etc.). Anything less than a stellar Christmas will dent Apple shares, and I will be paying much closer attention to the company's outlook for the March quarter than I usually do.
If Apple truly is transitioning from a seller of "stuff" to "stuff and services" the pronounced seasonality in its earnings around Christmas should be warning. We'll see.
And, finally, it seems I can't write a column these days without mentioning Tesla (TSLA) . I initiated a 2020 vehicle sales estimate for Tesla of 360,000 - 400,000 -- equal to Elon Musk's guidance for 2019 sales, which finished at 367,200 -- this week and was of course hit with the usual torrent of abuse from Teslaphiles. So, I am now like that guy in the Internet memes sitting at a table on a college campus with the sign that says "Prove Me Wrong."
When Tesla actually gets around to setting a date for its fourth-quarter earnings report I will set up that table and eagerly await Elon's guidance.