Can’t Be Bearish

You can’t be bearish on the stock market unless you’re bearish on the biggest group of stocks in said market. And it’s hard to be bearish when you see the type of numbers they’re putting up.

We’ll get to big tech’s results in a minute, but first, I want to look at how they’ve been acting before their earnings, which are coming out right now.

The big 5 are all at or near all-time highs (red dots), with a combined market cap approaching $10 trillion.

They’re now 25% of the S&P 500. It’s difficult to make a bearish case on the market without making a bearish case on this 25%.

Revenue at Google jumped 62% to $61.88 billion, the largest quarterly sales jump in 14 years. Lest you think this comp is coming off a covid pullback, check the chart. That’s 12% sequential growth, and that last print of $55 billion was an all-time high. YouTube’s ad business is doing okay, ringing in $7 billion in revenue, a gain of 84% from a year ago.

Revenue from Apple rose 36% from a year earlier to $81.4 billion. Earnings came in at $21.7 billion, their best fiscal third quarter that they’ve ever had. That was driven largely by the iPhone 12, driving iPhone sales to $39.57 billion, up from $26.42 billion.

Same story at Microsoft, whose revenue jumped 21% to $46.15 billion, its highest quarterly revenue ever.

Maybe all the good news is baked in. This type of thinking hasn’t been a profitable strategy very much over the last decade, but you can’t dismiss it out of hand. The bottom line is it’s hard to be bearish on these stocks right now, and therefore, it’s hard to be bearish on the market.

Josh and I are going to cover this and more on tonight’s What Are Your Thoughts?

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