Cars, phones, and homes make the world go round. These are trillion dollar markets with enormous global footprints. When people are buying cars, buying a new iPhone XS, and buying homes, the world economy feels right.
We’re in the second day of the Chinese chip-hacking saga that continues to weigh on
(AAPL) and tech stocks in general. Whether or not the fact that foreign governments may—or may not—be reading your emails will have a lasting impact on tech valuations remains to be seen.
Today is the first day of the
(DLPH) scare, which could rock the automotive world. Delphi trimmed guidance ahead of earnings today and Evercore ISI analyst Chris McNally said its updated outlook surprised even the most bearish of the bears. The stock is down about 12% even though the guidance cut amounted to only 1% of forecasted 2018 earnings.
It may look like an overreaction on the surface, but automotive investors have had a miserable year. The MSCI World Automotive Index is down about 13% year to date and is valued at a meager 9 times earnings. Car-stock sentiment has been weak; the sector has been at the center of the tariff debate and have been battling higher raw-material costs. Now investors have Delphi’s “challenging operating environment” comment to fret over. That appears to be code for flat sales in the U.S. and China.
I’m not sure there is a natural bottom for automotive stocks. Valuations look attractive, but people generally don’t want to buy them until auto sales have fallen materially. Sales are slowing, but with low unemployment it’s more likely that U.S. and Chinese automotive sales will just bounce along at today’s reasonably healthy levels.
That leaves the third pillar of the global economy, and it’s not looking so hot, either.
(LEN) said housing was slowing on Wednesday. The company hopefully added that the third quarter was only a pause in the ongoing housing recovery. We get more U.S. housing data out mid-month. Perhaps that will be good news. Total housing activity (housing starts plus new-home sales plus existing-home sales) has been slowing, but in aggregate, activity is only at about 75% of the prior peak.
It does make you wonder: With all this “good” news, how is the S&P 500 just off its all-time high?