Will the real U.S. economy please stand up?
In the one corner there is tech giant Apple (AAPL - Get Report) , whose products are the favorites of free-spending Millennials and 40-somethings. To this crowd, the U.S. economy is doing just fine, so why not plunk down $1,000 for a new iPhone X in digital cash? And from Apple's perspective, why not come out with bullish revenue guidance? Business is good around the globe, no material slowdown for products that in some cases cost people a year to save up to buy.
If you believe in Action Alerts PLUS holding Apple's quarter and momentum, then the FANG (Facebook (FB - Get Report) , Apple, Netflix (NFLX - Get Report) , and Alphabet (GOOGL - Get Report) ) stocks are now must-buys after a vicious rout. Caterpillar's (CAT - Get Report) growth slowdown call-out on its earnings call is irrelevant and the stock will be 20% higher when third-quarter results hit the wires in the fall, right?
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But folks, there is another U.S. economy out there starting to emerge. You know, the one that is being hit by tariffs from the Trump administration. The one where the selloff in FANG stocks underscores the cooling mood in Silicon Valley. To that end, I was darn lucky to chat with scores of community-bank CEOs at the annual KBW banking conference on Tuesday.
Want to know things about the economy (and market) that most will be discussing six months down the line? Chat up a community-bank CEO. Here are two quick observations from my talks:
Tech Bubble Letting Out Some Air?
Bank of Marin Bancorp (BMRC - Get Report) CEO Russell Colombo tells me he is starting to see a leveling off in residential and commercial real estate prices in San Francisco. For those of you living under a rock, that's the tech capital of the United States. Bank of Marin is a key player in San Francisco. Colombo adds that property prices tend to ebb and flow with the amount of venture capital flowing into -- and out of -- the Bay Area.
Suddenly the FANG stock selloff seems justified, no? Remember, the market is looking out six months.
Capital Investment Taking a Hit?
Perhaps Caterpillar mentioning a slowing order-growth rate in 2018's second half wasn't so silly. German American Bank (GABC - Get Report) CEO Mark Schroeder tells me customers are growing more cautious on capital-equipment purchases amid the Trump tariffs.
Schroeder's bank is a key player in Indiana (part of the Heartland). If farmers are beginning to delay purchases of shiny new John Deere (DE - Get Report) tractors on trade-war fears -- and early impacts -- that will show up in second-half growth. The question is whether investors will be prepared to see that growth slowdown.