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Can the Market Recover Without Apple?

Jeff Macke

Every financial era has its signature stock. It's a company that defines an era. For market bulls who own stock in Apple (AAPL) that could be bad news. Since early October Apple stock is down over 20%. Recently the S&Pc500 started a slide of its own, dropping 7% from recent highs. The question for investors isn't whether or not Apple stock can regain its mojo, but whether Apple is the canary in the coal mine signaling another economic downturn.

Long-time Apple bull Todd Schoenberger, managing principal at The BlackBay Group is concerned. "Apple is a true proxy of the global economy," he says in the attached clip. If Apple is slowing down it could be an ominous sign for spending worldwide.

To be sure, the world should dare to dream of having Apple's problems. The maker of all things that start with a lower-case "i" is still growing at a more than 20% pace, amassing cash faster than ever before seen in corporate history. But that growth has begun disappointing analysts. Too many of what Schoenberger says are derivative "me too" products, like the iPad Mini, have some wondering if Apple's best days are behind it, spectacular though they were.

The picture for the economy is darker but not entirely dissimilar. Take for example investor reaction to the Quantitative Easing programs launched by the Federal Reserve. The first two rounds of QE led to sharp and sustained market rallies, widely disdained by Fed critics but satisfying to investors. QE3 was impressive in terms of magnitude (more than $40 billion a month!) but not a hit with investors. Stocks are down almost 6% since the surprise announcement on September 13th.

It's a leap but flagging passions for all-things Apple may be a sign that the economic recovery has already come and gone. At the very least stock market participants are voting with their feet. It's a risk-off world as investors brace for the unknowns of fiscal cliffs and global risk. Unless Apple can find a way to get traders excited again the company's great bull run will be over.

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