(Bloomberg) — For investors trying to determine whether the stock market’s recovery will be durable, Apple has a clue.
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The world’s most valuable companies are the most influential in the S&P 500 Index, and participation in market capitalization-weighted benchmarks is essential for sustained growth. Apple’s stock has outperformed the S&P for his ninth straight week, helping his tech-rich Nasdaq 100 recover 22% from his June low.
Apple is a so-called tentpole stock that monopolizes investor attention and helps define the investment narrative, according to Nicholas Kolas, co-founder of research firm Datatrek. In that regard, he called Apple’s recent achievements “very encouraging.”
The S&P 500 is still down 10% in 2022 despite its gains since June. Meanwhile, Apple’s stock is about to turn positive this year after plummeting with other tech stocks in the first half. The company’s stock has outperformed in both bull markets since the 2008 financial crisis.
Investors are buying up Apple stock, and despite a potential recession by the U.S. Federal Reserve, the iPhone maker’s strong balance sheet has allowed investors to continue to return cash to shareholders and earn money from more than a billion users. I’m sure you can extract big profits. Dedicated to fighting soaring inflation.
“Apple is a safe haven that people flock to when there’s a lot of uncertainty in other parts of the market,” said Daniel Morgan, senior portfolio manager at Synovus Trust. It’s driving the S&P 500 gains based on model durability.”
As with the broader market, the risks to Apple’s rise are many. China’s tough Covid-19 policies pose a lingering threat to its supply chain, while inflation weighs on consumers.Apple reportedly asked suppliers to keep pace with last year’s iPhone production but some Apple suppliers are warning of a slowdown in demand.
Micron Technology Inc. warned this week that sales are expected to be weaker this quarter than the memory chip maker expected when it released its forecasts six weeks ago. This was followed by disappointing sales forecasts for Qualcomm, Intel and Nvidia.
But sobering news from chip makers didn’t stop tech stocks from rallying this week after the US consumer price index fell short of expectations. curb inflation. The Nasdaq 100 rose his 2.7%, while rate-sensitive stocks such as his cybersecurity firm Zscaler Inc. rose more than 10% his.
For Apple, the rally has pushed the stock back into expensive territory. It is priced at 27 times the expected profit over the next 12 months, compared to an average of 17 times over the last 10 years. That’s why investors like David Bernsen, Chief Investment Officer of The Bernsen Group, are wary of buying stocks at current levels.
“Apple is probably the safest place to play FAANG, but it’s not an attractive entry point.
(Updates share performance across.)
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