According to Bloomberg News, Apple Inc has suffered the worst week since a year ago in February, and on Monday, it was down again. But what can cause this trend to get reversed? If trends from the past are believed,d a weal dollar could do the trick.
On January 3rd, 2022, this tech giant has hit a $3 trillion market capitalization. Ever since, there has been an l3% stock loss, while the S&P 500 was seen to have lost 11%. This co-relation is not new and not happening for the first time. It has been observed in the past that every time the market value of Apple has hit a trillion-dollar milestone, a technical correction by the broad gauge market has been entered into. Every such instance has been reversed by a slump in the dollar, which proved to be a turning point.
In August 2018, when Apple reached a market cap of 1 trillion dollars, it gave rise to a 20% technical correction in S&P 500. The same thing happened two years later while breaching the $2 trillion milestones, which helped trigger the tech wreck in 2020. Other factors have been playing an instrumental role as well, including decisions of the Federal Reserve and macroeconomic developments.
Bloomberg News reports that an exciting aspect worth noticing is that the S&P 500 recovered with the dollar’s weakening every time such instances occurred. Consequently, Apple led the way again higher up.
It can be explained that whenever there has been a crisis across the globe and uncertainty has reined. There is a tendency to consider the significant US assets as safe places for international investors. And for the stock market investors, it is always big tech. However, as the demand for a haven escalates, the assets tend to get overvalued, which explains why dollar weakness has served as a key gauge for overseas investors. Also, tech has been a driving force in most of the pandemics, and in turn, has ended up creating an inverse correlation between US equities and the dollar.
The correlation between shares of Apple and the Bloomberg Dollar Index, a proxy for shares of the big tech companies, is a meager 0.2. The point is that it is best to keep a tab on the dollar, and the moment it becomes weak and allows more incentives to overseas investors, the S&P 500 index will reverse as it has done in 2022 until now. And as per history, Apple has been playing a significant role in the same.
