But more tests await investors this week with the most earnings week in many years. The five big companies Apple, Amazon, Microsoft, Facebook and Alphabet are all reporting earnings this week and with a combined index weight of 20.2% of these five names this will make or break equity sentiment. That five companies are now more than 20% of the S&P 500 is higher than what we observed during the dot-com highs and the energy dominance in the 1980s. A market cap concentration is always a sign of a structurally sick equity market and that a fundamental shift is coming. It’s also a sign of the narrowness of the equity market and the market is no longer reflecting the real economy – that’s being reflected by banks as the loans of Main Street sit on banks’ balance sheets.
Coming back to earnings we remain very sceptical of Facebook and Google’s earnings despite the positive surprise from Snap which we believe does not represent the overall picture of the online advertising market. Microsoft will most likely deliver to the joy of investors but could issue an outlook as Intel did with massive uncertainty related to the second half of the year. If many small companies go bankrupt globally it could impact the tail of Microsoft customers buying Windows, Office and Azure solutions. Apple could go both ways and is probably where there is the most uncertainty. On the negative side Apple could have been hit harder than expected due to stores closures, but then surprise on their Services segment as more customers have likely used the ecosystem buying apps, music etc. Amazon is really the dark horse this week. Revenue numbers will likely be up massively but margins could disappoint as the company has hired 100,000 extra workers, just increased pay for workers and the advertising segment could have taken a hit like Google and Facebook. With Amazon’s bigger and bigger market share and market capitalization the question of when the company will spin off its Amazon Web Services business (cloud) will arise and it could be a move from the founder and CEO Jeff Bezos to alleviate some of the anti-trust forces mobilizing against the company.