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Market Crash: Opportunities Everywhere (AAPL, AMZN, GOOGL, META, QQQ)

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Markets are reeling this morning, but I would implore investors to do everything they can to keep a cool head. While I cannot guarantee that we are at the exact lows of this selloff, there are a number of market leading stocks currently trading at very appealing levels.

There has been a confluence of bearish catalysts over the last few days, which we will cover below, but what is most important is that stocks are on sale and the world is not likely to end anytime soon. It can be helpful to take a step back and see that even after this selloff, many stocks and the broad market are still up nicely YTD.

Some of the greatest stocks and companies have moved considerably off their recent highs such as Apple ((AAPL - Free Report) ), Amazon ((AMZN - Free Report) ), Meta Platforms ((META - Free Report) ), Alphabet ((GOOGL - Free Report) ) and some of the best ETFs like (QQQ - Free Report)  and (SPY - Free Report) .

Investors don’t need to go all in today, but building your watchlist and buying as the volatility falls should be the plan.

Zacks Investment Research
Image Source: Zacks Investment Research

What Happened to the Stock Market?

Last week was one of the busiest of the year; we saw earnings from many of the big tech companies, there was an FOMC meeting, a weak employment print pointing to a possible recession and a huge policy shift from the Bank of Japan. If there were a period market to correct like it is today, it seems now is the appropriate time.

So why did these events cause such a rapid selloff? It started with big tech. At the earnings calls from Microsoft, Alphabet and Meta Platforms investors were critical of the huge capex being spent on AI, while none of the companies had much profit to show for it. Fears of an AI bubble percolated, and investors began selling many of the AI darlings.

It should be noted that outside of the large capex, these technology companies posted outstanding earnings and still believe in the long-term value of their AI infrastructure spending.

Then on Friday morning, we saw the second poor employment report of the week. The unemployment rate ticked up to 4.3% and worries of an impending recession spread.

Finally, the monetary policy out of the Bank of Japan threw the final wrench into this bearish trifecta. Japan has been far behind the other central banks in terms of tightening monetary policy and only just began to hike interest rates last week.

The reason why this affected the US stock market is a little complicated, but basically it removed funding for cheap money. What happened is that the carry trade is being unwound. Because interest rates were so low in Japan, investors would borrow money in Yen terms and would take that leveraged money buy stocks and other assets around the world.

So essentially, because this funding mechanism is going away, many investors are being margin called on their borrowed money, causing further selling.

Will Stocks Continue to Fall?

I lean towards this correction being much closer to the end than the beginning. Although the causes of the selloff are concerning, they are very likely transient. Yes, the unemployment rate jumped, but the US economy shows no additional signs of recession. Furthermore, the Fed is about to start cutting interest rates, which will be a boon for the economy and stock market.

As for the Yen carry trade unwind, we are in the midst of it, but that too is being priced into the market right now. Unless there are more systemic issues related to it, then it too will fade.

As for AI, I think this catalyst is the most uncertain moving forward. Was it just hype or will it produce the productivity and profit gains it promised? I think it likely will, but it may be over a longer timeline than investors originally thought.

The big tech companies are absolutely gushing with profits and are growing their businesses at very impressive rates still. Investors are going to recognize this, and buyers are going to step in.

Leading Technology Stocks on Sale (Amazon, Alphabet, Apple, Meta)

All my favorite stocks are on sale today. Amazon, Alphabet, Apple and Meta Platforms are all growing like startups, yet they are trillion-dollar, mammoth companies. Amazon is expected to grow its earnings 30% annually over the next 3-5 years while Meta is expecting 20%. It is a bit slower at Alphabet and Apple, with 17.5% and 12.7% respectively, but those are still great growth rates.

All the stocks in the group are also trading at reasonable valuations. AMZN, META and GOOGL are all trading below their 10-year median valuations, with AAPL still trading at a premium.

However, both Apple and Amazon enjoy Zacks Rank #2 (Buy) ratings, reflecting upward trending earnings revisions. But most notably, all these companies posted truly incredible quarterly earnings results, demonstrating the deep roots of their businesses.

If you are an investor that likes simplicity, picking up a technology ETF like Invesco QQQ might be the simplest strategy. It too boasts a Zacks Rank #2 (Buy) rating and has been one of the best performing ETFs in the market over the last 10 years.

Zacks Investment Research
Image Source: Zacks Investment Research

Be Greedy and Buy Stocks when Others are Fearful

Everyone knows the mantra, but when it comes time to be greedy, many investors are paralyzed. All of a sudden investors are talking about waiting for another leg down, but it never comes.

Yes, it can be difficult to step up and buy when it looks like the world is going to end but that’s how you get discounts.

I will say, don’t try to catch a falling knife. There is nothing wrong with waiting for the volatility to die down and for stocks to start consolidating sideways. But don’t overthink this market environment too much, this appears to be a buying opportunity.

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