It was an interesting week on Wall Street, to say the least. War worries were in the picture, and that is generally not a bullish backdrop for the stock market. The week started off well, but the buyers backed off and the week closed out with the Dow down 1.1%, the Nasdaq down 1.5%, the S&P 500 down 1.4% and the small-cap Russell 2000 down 2.7%. It seems like we should have seen bigger weekly declines, but we did not.
Earnings season was a good one, which helped a lot given all of the geo-political issues. The long-sleeping Volatility Index (VIX) reawakened and headed sharply higher, and that had many bulls smiling. It was not that they wanted chaos and panic, but the lack of fear had many bullish market sages worried that something was going to go wrong. Complacency historically precedes market unrest, but it is a plus that this current market downturn was very mild.
On a side note, we have all been hearing worries that the FANG stocks are getting too big and powerful, and that brings into the fold antitrust and monopoly issues. There are some analysts that say that the size, scope, and market values of these companies are crushing any competition. Look at the debacle with Snapchat (SNAP) for instance, which was down 14% on Friday alone.
All is fair game in free markets, but when companies get gigantic, the government seems to step in to “fix things.” The power of Microsoft we saw through the late 1990s eventually drew the same thing as anti-trust forces in the government took a long look at “Mr. Softie.” The tech bubble of 1999-2000 subsequently burst, but it was not just because of Microsoft. It was a stretched time in terms of stock market values, but the Microsoft case was interesting just the same.
There are strategists, scholars, and book writers saying very interesting things. Early investors in the FANG stocks are even commenting that maybe the Amazons of the world have become too big. One commentator even said that the FANG stocks have obtained a “cultural monopoly,” as they move into “streaming” and movie-making. This is a very interesting concept, especially when we consider the billions that the likes of Amazon and Netflix are investing in “content.”
It will be interesting to see how a market that has been driven higher by a relatively small group of stocks plays out. They have been very impressive performers. However, the FANGs are not invincible, just as Intel, Microsoft, Cisco, and Dell were not invincible back in the 2000 tech bubble era.
The Gorilla remains optimistic and bullish, but a lot of analysts and strategists are raising these issues in a big way. That said, the Gorilla wishes each and all a relaxing August weekend, and we will be back in action on Monday. Let’s hope calmer heads prevail with the geopolitical tensions, and maybe this momentary lull in the stock market will be brief, and stocks can resume their upward trend. Have a great weekend!
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