The Verdict on Apple’s Newest Releases

in Market Commentary by

U.S. equities started the week strong as tensions surrounding Hurricane Irma and North Korea subsided, at least temporarily. The S&P 500 hit multiple record highs as the week progressed. And despite a bit of volatility, international stocks were able to hold onto gains and end the week higher. Bond yields crept up, while oil prices rebounded on stronger demand forecasts from OPEC and the IEA.

Weekly Returns:
S&P 500: 2,500 (+1.5%)
FTSE All-World ex-US: (+0.9%)
US 10 Year Treasury Yield: 2.20% (+0.15%)
Gold: $1,321 (-1.8%)
EUR/USD: $1.195 (-0.7%)

Major Events:

  • Monday – News surfaced that Chinese authorities planned to shut down the country’s bitcoin exchanges in an effort to prevent capital from fleeing to digital currencies.
  • Tuesday – Apple unveiled its new iPhone X, as well the iPhone 8 and other product updates at its annual September event.
  • Wednesday – It was reported that China is preparing to sell $2 billion of US-dollar denominated bonds, in its first such offering since 2004.
  • Thursday – U.S. weekly jobless claims fell to 284K, coming in better than expected.
  • Thursday – After weak figures for most of the year, the U.S. consumer-price index increased 0.4% in August from a month earlier.
  • Friday – A bomb was detonated on a London subway train, injuring dozens of passengers.
  • Friday – In defiance over recent sanctions, North Korea fired another missile that crossed over Japan’s northern island Hokkaido.

Our Takeaway:

Apple hosted its annual “special event” on Tuesday where, true to form, it announced a number of new products and updates. But this year was different. It marked the 10th anniversary of the iPhone’s inaugural launch, which produced an unusually large level of excitement leading up to the event. The media couldn’t help but speculate about the potential “iPhone X” announcement. After all, Apple has a history of groundbreaking innovation, and given this was the iPhone’s 10th anniversary, the newest release had to be big, right? Those not in attendance followed live updates online, eagerly awaiting Tim Cook’s earth-shattering announcement. And finally, after more than an hour of waiting, the moment came. . .

The verdict? The iPhone X was more or less in line with expectations. It has some cool new features like a larger edge to edge OLED display, but then again Samsung already had that with their Galaxy S8. It boasts a 12-megapixel camera on both the front and back—again, something that’s been done before. Perhaps the most talked about feature was the new facial recognition technology to better secure and unlock the phone. On the surface, this certainly doesn’t seem as groundbreaking as the original iPhone was 10 years ago. But, does this mean Apple’s history of innovation is coming to an end? I’m sure there are some that would argue yes, but the jury is still out. Perhaps there’s another question to ask: does the company actually need to innovate at that level?

Apple may not be the first mover into the edge-to-edge displays or higher megapixel cameras, but there is one trend many would agree with: they often produce the best, most polished version of whatever feature they’re offering (with certain exceptions of course). And that’s earned them a very loyal fan base. So loyal, in fact, that the company is betting it can jack up prices for the new phone to over $1,000. My personal opinion? People will buy it, probably including myself.

But is this annualized upgrade/release cycle enough, or will the company need more groundbreaking releases to justify the world’s largest market valuation? That’s the trillion dollar question.

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Brendan Erne, CFA
Brendan Erne serves as the Portfolio Management Team Leader with Personal Capital Advisors. He has over 15 years of industry experience, spanning almost all levels of the investment process, including several years at Fisher Investments as an equity analyst covering the Technology and Telecommunications sectors. He also co-managed a large cap growth portfolio and co-authored Fisher Investments on Technology, published by John Wiley & Sons. Brendan is a CFA charterholder.
Brendan Erne, CFA

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One Response

  1. Mike Stanton

    I plan to attend the event in Dallas.

    Reply

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