The dominating headline news was about the Chinese government banning Apples phones for state employees last week. That sent Apple stock down 6% for the week which also sent the general market down because Apples weighs heavily on indices and sentiment. The market is concerned about the spillover impact from banning Apple phones. What if it extends to other American products and companies?
Apples is one of the biggest job creators in China. Banning Apple phone in China is suicidal for the Chinese government when the economy is so bad with a super high youth unemployment in China now. The Chinese government is trying very hard to revive its economy. Maybe the Chinese government thinks that the Western countries are hostile and not reliable because of all the sanctions that the U.S has implemented against China. And they are determined to be self sufficient. The recent Huawei 5G phone release is an example.
This Apple phone development in China is not a good news and it carries long term negative effects. This is akin to the moment when Donald Trump declared trade war against China in 2018. The relationship between China and the U.S. has never been the same since 2018. The U.S. has switched its strategy from fighting terrorism to anti-China in 2018. Both parties are united on the strategy that China has become the biggest threat against the U.S.
The U.S. has shown strong interests in Vietnam and India in the G20 2023 New Delhi Summit for the purpose of isolating China. The U.S. is actively working on getting manufacturers out of China and moving to India and Vietnam.
The cold war between China and the U.S. will escalate and last longer than we can imagine. Chinese market share for the American companies now becomes a liability as supposed to revenue generator. We are lucky if the cold war doesn’t evolve into a hot war.
That being said about the long term impacts from China, the short term market impact was only felt on Apple stock. The general market corrected along with Apple stock, but those selling days weren’t distribution days, meaning the selling didn’t come with heavy volume. So at this moment, we are still treating the 8/18/23 low as the reference point. The rally against the 8/18/23 is still structurally sound.
Next Wednesday and Thursday we will have CPI, PPI and initial jobless claims data. The inflation data probably will reinforce the expectations that the trend of inflation is down and the Fed is near or at the end of the rate hiking cycle.
We are at the very late stage of the 4-year cycle that started in March 2020. The state stage of the cycle is typified by rising energy price and defensive stock picking (hiding in mega tech). The recent rise of energy stocks is speeding up the cycle. High oil price can definitely take down the entire market and economy. High oil price in 2008 predated the 2007-2009 financial crisis. XLE (oil sector ETF) closed at 92.05 last Friday and is very close to the prior high 93-94 zone. Will XLE breakout or make a triple top? We shall see.
Below is the NASDAQ daily chart.
It is 14 days into the new daily cycle that started from the 8/18/23 low. It is acceptable for the daily cycle to be choppy. The up trend is still intact despite the negative development in China.
Apple will release iPhone 15 on Tuesday September 12. Perhaps that will wash out the negative China news. We are excited for the Apple Vision Pro. We are betting on 3D computing via Matterport stock MTTR. MTTR was a SPAC stock and got punished brutally during the rate hiking cycle. MTTR will be profitable in 2024 and the market potential is enormous for MTTR digital twin technology.