The greatest concern in the stock market right now is global trade.
There are many other issues going on, like interest rates, inflation, growth, etc.
But when we look at the root cause of the stock market correction we are in, it’s a potential trade war.
And I don’t blame investors for being worried.
A trade war has the potential to wreck not only the U.S. economy, but global markets as well.
So it’s a risk worth watching.
Today, I want to give you another way to keep tabs on any possible developments. And no, we are not monitoring President Donald Trump’s Twitter account.
Instead, I have one simple indicator for you. It’s a stock to watch that will tell you when you need to be concerned about a trade war.
A Unique Barometer
Whether you like Apple Inc.’s (Nasdaq: AAPL) products or not (full disclosure: I’m a big fan), you can’t ignore the facts.
The company’s iPhone X, which many have said was a failure, has been the most popular smartphone in the world since it was released.
Its Apple Watch, which people still love to hate, is the most popular smartwatch, period.
These are the facts.
And since it provides consumers with two of the most popular products that are on the pricier side of the market, Apple becomes a unique barometer for the overall health of the economy.
But there’s another reason Apple is the stock indicator we can use.
The company is global.
In Apple’s most recent quarter, sales in China surged 21%.
And get this: The iPhone X, the world’s most expensive smartphone, was the biggest seller in the country.
Analysts always thought the only way to penetrate China’s massive consumer market was with low-end smartphones. That’s what they typically buy.
But Apple did it with the highest-priced phone ever.
That’s remarkable for Apple, but it speaks to the health of consumers even more.
If consumers around the world were shunning expensive devices for cheaper alternatives, it would be a sign of less disposable income.
We are not seeing that.
And all of this comes back to the greatest fear in the market right now: trade wars.
If there is an effect from a trade war, Apple will feel it. It makes and sells goods in different countries.
This is likely why Apple’s CEO, Tim Cook, met with Trump on April 25 — to talk tariffs.
Later, when Tim Cook was on CNBC, he commented on his expectations for trade between the U.S. and China:
I am pretty optimistic there. I think that China and the U.S. have this unavoidable mutuality where the U.S. can only win if China wins, China can only win if the U.S. wins and the world can only win if both win.
This speaks volumes on trade expectations that the market seems to be getting wrong. And there’s an enormous opportunity in this.
Get Ready for the Breakout
We have the CEO of a company that desperately needs good trade relations saying he is “optimistic” about negotiations. This comes just days after meeting with the president of the United States.
The market is still in wait-and-see mode, looking for more news on the trade front.
This worry has stalled any rebound to lift us out of the correction, despite a record-breaking earnings season.
That’s why relying on the price action in a trade-dependent stock like Apple can tell us far more about what to expect from the market than daily headlines. And right now, Apple’s stock is telling us to buy this correction and get ready for the breakout higher in the coming days.
So if you were thinking about selling stocks, now’s not the time.
It’s time to be greedy.
Chad Shoop, CMT
Editor, Automatic Profits Alert