The large majority of my clients own stock in Apple and gold so I obviously keep a close eye on both. For years these were two of the best performing assets you could own but both fell out of favor last fall. The interesting thing that I’ve noticed is how closely they’ve tracked each other over the last year and a half.
The blue line is gold (GLD, left axis) and the black line is Apple (AAPL, right axis) – (click to see a larger image)
Both topped out within 2 weeks of each other, put in what could be a bottom on the same day (June 27th), and have virtually taken the same path with their peaks and troughs within days of each other.
What this illustrates is how markets exhibit the same dynamics – it doesn’t matter if the asset is the stock of a software/hardware company or a shiny piece of metal. All bull and bear markets exhibit very similar dynamics because it’s the people (that make up the market) that matter. And we humans always fall for the same emotional traps of buying when things are exciting and selling after times of panic.
Hedge funds/traders play a large role in this too since so many love to follow momentum. They’ll keep the game going on the way up until they’ve suckered in enough people to unload their shares to around the highs, and then continue selling an asset lower until enough suckers have thrown up their hands to quit and sell at the lows.
I actually think there’s a good chance we see this lock-step movement between Apple and gold break in the very near future, but thought it was an interesting thing to comment on to illustrate that investing isn’t always about analyzing financial statements and fundamentals.
Thanks for following!
Nick