I’m still a believer in one of the most powerful economic strategies on the table right now: grow GDP faster than debt. It’s a clean, bullish way to address the deficit problem without drastic cuts or tax hikes. If policymakers can stick to that trajectory, it’s a fundamentally positive and bullish event for markets. However, and that’s a big however for me, there are still some bizarre things going on that have me pausing.
Let me start with the elephant in the room. Or, I should say, the elephant in the indexes: Apple.
For the first time in a long while, I think Apple looks vulnerable—from nearly every angle. Let me explain:
- App Store defeat: They just lost their case against Epic Games. That weakens the moat around one of their most profitable segments.
- Jony Ive’s return… as a competitor: Apple’s legendary former designer is working with OpenAI to launch a competing device. That’s not just symbolic—it’s strategic.
- AI lag: Google is surging ahead in AI. Meanwhile, Apple is… quiet.
- Tariff risk: Their production footprint is highly exposed to China tariffs. This risk is not priced in.
- Debt buildup: Once you net out Apple’s debt, its famous cash pile is just $40 billion—barely 1% of its market cap. That used to be their strategic advantage. Now, it’s almost a myth.
Triple oof. Quadruple oof. It’s giving me flashbacks to Blackberry’s fall from grace. Remember, these things happen fast. But even worse, everyone, and I mean everyone, is long or heavily weighted Apple in some way. So, this has me thinking. It’s not great.
Now, another thing has jumped on screen during the recent move higher: high multiples.
I can’t stand high multiples.
They never and I mean never end well.
Price-to-sales ratios are once again getting out of hand. We’re not quite at 2022 levels, but we’re close enough to feel déjà vu. Palantir has a PS ratio of over 200.
I’m not bearish, but I’m more watchful than ever. The recent market bounce has happened so fast, it changed the data overnight. A few major shifts may be needed before the next true market surge. Most importantly: Apple, in particular, may no longer deserve to be the anchor weight of every portfolio, fund, and index.
As I see it: the next leg up for markets will come, but only after we confront some overdue recalibrations.