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7am Saturday

January 18, 2020

Good morning!

I will never grow tired of saying this, but once again ALL major U.S. stock market indices closed at record highs yesterday. Almost 1/4 of the stocks in the S&P 500 are trading at new highs. We’ve now gone 68 days without a move of 1% or more to the up or downside, which speaks to the relative calmness of this stage of the bull market.

The Trillion $ Club

Google joined the Trillion $ club this week as their market cap crossed $1 Trillion for the first time. Google is one of just 3 U.S. companies in the 13-figure club:

The Trillion $ Club: Apple, Microsoft, Google

Apple is the largest company in the world with a market cap of over $1.3 Trillion. Investors have had a nice run with Apple as the stock price is up more than 10X over the past decade:

Apple has over 1 billion installed users:

That’s quite remarkable! Keep in mind these are paying users. The biq question is, can a company this size continue to grow? Neil Cybert over at Above Avalon writes that the big question facing Apple is, “How will Apple find its next billion users?” While continuing to grow the user base is important, I don’t think that it’s as important as finding ways to further monetize the 1 billion users they already have. More services. More wearables. Product upgrades. New products. Product integrations. These are the keys to Apple’s future growth.

There’s nothing like having 1 bilion fans of your products. If Apple continues to focus on improving these products and launching complementary products and services they will only strengthen the Apple ecosystem. I for one love how my iPhone, Apple Watch, iPad, Apple TV, and Mac all tie everything together. iCloud makes it so easy to manage my photos, music, and files.

Apple has nearly $50 Billion of cash:

The best thing Apple can do is use this massive cash pile to invest in research and development and continue to build life-changing products. They have the money to hire anyone they want or to buy nearly any company they want. As long as the company is managed well there is no reason they shouldn’t continue to grow. They have the resources to do just about anything. They just need to maintain a culture of innovation and allow their people to expiermnet in new ways.

NOTE: I’m not suggesting you invest in Apple stock. I’m just sharing my observations. Be sure to do your own homework or hire an advisor.

Brian Wesbury’s 2020 Economic & Market Outlook

Don’t miss Brian Wesbury’s 2020 economic & market outlook (6 min video):

Key points:

✔️ the U.S. economy is in the 128th month of expansion (the longest on record)
​✔️ unemployment is at 3.5% (the lowest in 50 years)
​✔️ the U.S. stock market just came off a spectacular year (in spite of trade war fears)
​✔️ Wesbury’s model shows the market is undervalued by at least 12.5%
✔️ a “tsunami of technology” is driving the economy (raising productivity, boosting profit margins, and will continue to grow profits)​
✔️ expect: another year of economic & stock market records
✔️ don’t expect: a recession

I’ve been following Brian for a long time. I became a fan after listening to him give a bullish talk at The Findlay Country Club in February, 2009. For those of you that don’t remember that was near the bottom of the last bear market. Brian was one of the few economists with a positive outlook at that moment. I remember nodding my head in agreement with his views. I’ve followed him closely ever since then as I think his views have been spot on and he’s a refreshing voice anytime there is a negative headline or correction in the market.

The Presidential Cycle

Since it’s an election year I thought it’d be good to look at the Presidential Cycle for stocks.

  • Historically, stocks have performed well in an election year with positive returns every quarter of the year.
  • Expect Q3 to be the weakest as the election heats up and uncertainty is high.
  • Q4 is typically the best quarter of the year and is higher 80% of the time. I believe that Q4 is most likely to be the strongest because the uncertainty around the election is behind us and investors know who the next president will be.
Source: Ryan Detrick, CMT

Reading, Listening & Other Resources

20 Bold Predictions For 2020 (The Invested Dads) – Josh and Austin with some fun predictions for this year. Sorry, Austin, you are wrong about Tesla.😀

What Will Happen In The 2020s (AVC) – 10 more predictions for the 2020s from a smart venture capitalist, Fred Wilson.

Oops. I Missed a Credit Card Payment! (The Everyday Advisor) – Jess shares some lessons learned in case this ever happens to you!

Enjoy the 3 day weekend! Take a few minutes on Monday to read about the life and legacy of Martin Luther King Jr.



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