In a quiet week for economic and corporate news, Tuesday will bring the biggest economic data of the week.
At 10:00 a.m. ET, the latest job openings and labor turnover survey, or JOLTS report, will be released. This report, which includes jobs open, jobs taken and jobs folks quit, is one of Federal Reserve Chair Janet Yellen’s favorite reports.
This data also comes just a few days after the May employment report, which showed that fewer jobs than expected were created in May while the unemployment rate fell to a new post-crisis low of 4.3%.
Tuesday’s JOLTS report also comes one week before the Fed’s next two-day policy meeting kicks off, a meeting which is expected to see the Fed raise interest rates for the third time since December in its June 14 announcement.
On Monday, Apple hosted its latest Worldwide Developers Conference.
The world’s biggest company by market cap announced a bunch of new things — new MacBooks, new iMacs, new iPads, and HomePod, a connected home device meant to compete with Amazon’s Echo and Google Home.
Overall, however, the event felt sort of flat.
For the Apple loyalists, certainly, there was a lot to like about the event, with the company’s pushing of its Siri assistant throughout the day as AI and VR continue to dominate all conversations in the tech world.
But given that the stock market this year has been all about the performance of the FAANG stocks — Facebook (FB), Apple, Amazon (AMZN), Netflix (NFLX), and Google (GOOGL) — it’s worth taking stock of just what investors are betting on.
The stock market, and its investors, are inherently forward-looking and, all else equal, bullish on the prospects of their investments to grow a steady stream of profits that can be returned to shareholders.
Apple’s iPhone — which is expected to get a major facelift later this year — is one of the greatest consumer products of all-time and has fueled the company’s incredible profit growth. Facebook and Google are also enjoying growing profits in the high-margin online ad business.
Amazon has seen profits grow as its Web Services business has flourished, and margins have grown at Netflix in recent quarters, though the company’s negative cash flow is still in the hundreds of millions per quarter.
Many have said that since such a few high-flying tech stocks are powering the market investors ought to be nervous. History, however, has shown that it is almost always just a few stocks that are responsible for an outsized portion of the market’s overall gain. On this count, then, there is nothing for investors to fear.
But remember that stock investments are not just about what a company has done lately or is doing now, but what it can do in the future. Certainly, Apple will continue to sell millions of iPhones for the foreseeable future. Getting its users hooked on its software creates something almost resembling a recurring revenue stream from hardware that is both physically fragile and a sign of social status. It’s a very, very good business.
Monday’s Apple event, however, ought to remind investors that the future both for this company and the tech world in general is less certain than recent advances in products, software, and stock prices might have you believe.
In 2011, venture capitalist Marc Andreessen said software was eating the world. The advent of services like Uber, Airbnb, Snapchat (SNAP), and so on proved this to be correct. But it is now six years later and the buzz on the West Coast is about virtual and augmented reality. And while this may turn out to be the beginning of a VR/AR revolution, it still seems like a major leap to believe strapping goggles to our faces to watch movies is going to have the transformative effect on society that Facebook and Google Maps and iPhones did and still have.
And no matter which angle you take — the tech angle, the investor angle, the consumer angle — it is hard to see why betting on the FAANGs to continue dominating their industry is going to get any executive or investor or commentator in trouble. This domination is now conventional wisdom.
But when the tech world’s big event is a conference at which incremental improvements to already-ubiquitous platforms, it is worth asking what, exactly, we’re expecting to happen next. Or whether we’re simply still excited about what’s happened recently.
Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland
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