Three Data Points on AR/VR Market, Fed Pause Probability, Returns on a Pause?

1. Who wins the AR/VR market? History says it's a duopoly…

2. FED pause probability. 72.5%

3. How do markets perform on a pause? Here's the data...

WINNER TAKE ALL IN AR/VR? LIKELY NOT

Apple officially launched their augmented and virtual reality headset, the Vision Pro, at WWDC 2023. The headset is designed to blend the real and digital world, and it features a number of impressive specs. We expressed our views on the device and space on ou podcast this past Monday.

The Vision Pro is not yet available, but it is clear that Apple has big plans for the product. The company has said that the Vision Pro will be a "game-changer" for AR/VR, and it is likely to help fuel the category longer term.

As we step back we looked at data around other operating systems. If we take the mobile operating system market as an example, we can see that it is not a winner-take-all market, but rather a duopoly. Today, Apple has a market share of 32.79%, while Android and others have a market share of 67.21%. It is possible that the AR/VR market will develop in a similar way, with a few major players dominating the market.

So far it looks like Meta and Apple. Listen to our podcast

WHAT'S THE PROBABILITY OF A RATE PAUSE? 72.5%

The Federal Reserve is likely to pause its rate-hiking cycle at its upcoming meeting. This would be an important event, as it would provide a floor for interest rates, which would help to stabilize the cost of capital for businesses. We use fed fund futures to measure he probability of a pause. Right now that probability is 72.5% for this upcoming meeting. Real-time inflation trackers suggest that inflation is continuing to moderate, which could lead the Fed to believe that it has made enough progress in bringing inflation under control. The datapoint highlights how markets react to a pause. s.

MARKETS LIKE A FED PAUSE?

The markets have a history of doing well once the Federal Reserve (Fed) pauses its interest rate hikes. In fact, data shows that following a pause markets are positive one year out. Below we show the returns per sector.

The best sector is technology +34% on avg since 1990, followed by some of the more cyclical areas of the market, such as industrials and materials. This is because cyclical stocks tend to benefit from strong economic growth, while technology stocks tend to do well when interest rates are stable.

Disclaimer: Not a recommendation to purchase or sell any securities mentioned. This is for educational purposes only.