Catch up on this week’s top stories around volatile markets, Apple’s cash plan and cryptocurrency meltdowns. Plus what it all means for you and your investments. (Reading time 3:45 mins)

This information does not take into account your personal objectives, financial situation or needs. You should consider if the relevant investment is appropriate having regard to your own objectives, financial situation and needs.


1. The volatile market day we’ve been waiting for

It was a tough start to the week for the stock markets globally. In fact, when the US stock market fell 4% on Monday, it was the largest one-day drop in 6 years.

Despite the dramatic plunges of Monday and Tuesday, key global stock markets have still delivered strong performance over the past couple of years.

What does this mean if you’re invested in the stock market?

Stock markets never go up in a straight line; there are always bumps along the way.

The stock markets were overdue for a sell-off given the consistent highs of 2017 and beginning of 2018.

What triggered the volatility seems to be the prospect of rising interest rates. Interest rates are effectively the “cost of money”, so any increases tend to worry investors since it may negatively impact corporate profits.

However, the prospect of higher interest rates in the US is no surprise – it has been talked about for quite some time. We believe the sell-off seen this week is a by-product of investors realising some profits from their investments, rather than any material, negative changes in global economic conditions.

What does this mean if you’ve invested money with AtlasTrend?

We’ve been positioning our investments for a potential fall in the stock market by keeping a portion of the AtlasTrend managed funds’ assets in cash.

The recent sell-off was seen as an opportunity for our investment team to potentially buy shares of excellent companies at effectively discounted prices compared to the previous week.

As long-term investors, we’re not fazed by short-term losses in global stock markets as it can be the best time to buy.


 2. Apple plans to return cash to shareholders

In an interview with the Financial Times, Apple’s finance chief indicated the company plans to reduce its net cash balance to “approximately zero”.

The tech giant is set to announce their capital allocation plan i.e. whether it will go towards acquisitions, stock buybacks or dividends when March quarter earnings are released.

What does this mean if you’re invested in Apple shares?

Apple’s business model makes a lot of cash. In the past 3 financial years, it has generated over US$60 million in cash each year from its operating activities.

As at 31 December 2017, the company had US$163 billion of liquid assets and cash (less debt).

With an aim to bring this enormous cash balance to zero, Apple could significantly increase dividends and share buybacks to provide more cash returns to shareholders.

This is a major change from when Steve Jobs was running Apple, who once said the company’s big cash balance “gives us tremendous security and flexibility”.

What does this mean if you’ve invested money with AtlasTrend?

One of AtlasTrend’s managed funds owns Apple shares.

We don’t typically invest in technology shares with large dividend prospects. We prefer these companies to sensibly reinvest excess cash in the business to keep growing.

However, Apple is a different story. Its net cash balance is so enormous (more than 25 times that of Amazon) that we believe there’s room to give some cash back to shareholders – all while reinvesting enough to innovate on the product and business front.


 3. Is it all over for cryptocurrencies?

Bitcoin prices sank below US$6,000 during the week, yet traded close to US$20,000 less than 2 months ago.

It’s been a rocky 2018 for Bitcoin; the value of the cryptocurrency has dropped over 50% since the start of the year. It makes the recent decline in global stock markets seem like the size of a mosquito bite.

What does this mean if you’re invested in cryptocurrencies?

In mid-January, we wrote about our concerns for crypto investors in light of likely governments crackdowns on the use of cryptocurrencies – signalling it could negatively impact coin prices. It appears we were right in that prediction.

When we wrote that article, Bitcoin was trading at over US$11,000. Less than a month later, it has dropped another 40%.

Recent reports have indicated governments will ramp up plans to regulate cryptocurrencies, we believe it will continue to be a very speculative investment.

Depending on the type of regulation that eventuates, there is a real possibility that cryptocurrencies in their current form today might end up being worth very little.

What does this mean if you’ve invested money with AtlasTrend?

AtlasTrend managed funds do not currently invest directly in cryptocurrencies.

While we believe the blockchain technology behind cryptocurrencies has enormous potential, at the moment we believe blockchain is better suited to other applications where governments are not likely to legislate against it.

You can check out our thoughts on how blockchain works and its various applications across industries here.

For more about the types of managed funds AtlasTrend provides, click hereSign up for full details on what the Trends invest in, and access actionable investing insights.

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About Kent Kwan

Kent Kwan is a Co-Founder of AtlasTrend, an investment platform that makes it easy for anyone to learn and invest in trends impacting our world. Kent has over 17 years experience in financial markets including as Chief Investment Officer at Arowana International Limited, and roles at JP Morgan and Macquarie.