Technology giant Apple Inc. has suffered a breathtaking $1 trillion market value drop over the last seven months. In just the past one year, it has lost almost $1 trillion. This decrease comes on the heels of a record high of about $3.9 trillion in December, according to FactSet. Last Friday, Apple’s market value was once again above $3 trillion. Therefore, this speaks not just to their performance but to the incredibly powerful effect of outside economic forces on the company’s performance.
Analysts blame this slump on a host of issues, not the least of which is the continuing trade war started under former President Donald Trump. This uncertainty is causing alarm among institutional investors about the outlook for Apple’s stock. Recent news, from tariffs to court challenges to Google’s monopoly on search, have exacerbated their worries.
The Impact of Trump’s Trade War
Moreover, Trump’s trade war has undoubtedly done a lot of damage to Apple’s stock market performance. Just a week before, the company’s shares plummeted by 3%. This decline came a week after Trump called on Apple to relocate all its production to the United States. This unfortunate incident was just one of many incidents in this growing trend. In early April, the relatively smallish stock plummeted 9.25%, its largest single-day decline in five years after Trump threatened to impose deadly reciprocal tariffs.
Despite yesterday’s positive news, analysts say the uncertain economic climate spawned by the erratic firestorm of tariff imposition and threat is the biggest worry for Apple. According to Angelo Zino, industry expert, “Secondly, it’s the tariff talk.” Zino added that for all of these headwinds, Apple has always amazed investors with its ability to push through difficulties.
“The Street has continuously tried to kill off Apple at times,” – Angelo Zino
As this developing international trade dispute deepens, it begins to cast shadows on Apple’s long-term survival in a rapidly destabilized market. You should have confidence that they will get through this, and why, Thomas Martin, senior portfolio manager at Globalt Investments. While he admits the company is in a tough place now, he doesn’t see a permanent underachiever in Apple’s future.
Legal Troubles and Market Uncertainty
In August, a federal judge ruled that Google maintained an illegal monopoly over the services offered by search engines. This choice would pose significant threats to Apple due to their preferential deals with Google. This ruling significantly increases the complexity of Apple’s already fragile market position.
As Scott Ladner, chief investment strategist at Horizon Investments recently warned, extended uncertainty can have traumatic economic outcomes. He went so far as to say that an economy and private enterprise cannot exist in a condition of very high uncertainty for long. Sooner or later, the economic consequences will follow. More than anything else, investors are scared spooked. More broadly, they are trying to come to terms with what all of these legal decisions will mean for Apple’s future growth prospects.
Investor Sentiment and Market Dynamics
As the stormy year winds down, many observers are advising against a rash panic sell-off. Tim Steffen, an advisor at Robert W. Baird & Co., noted the need for a balanced portfolio. He cautioned against overreaching in response to market pressures. You may think your portfolio is diversified because you have four different mutual funds, he explained, but if those funds are all following the same index of stocks, your account isn’t really that diverse.
Given these challenges, Thomas Martin recommended that investors stop checking their 401(k) balances every day. The last thing I think people should do is check the value of their 401(k) every day,” he added. This view I believe is informed by a shift of focus away from short-term market volatility and looking out for a long-term investment strategy.
“There’s always been something out there, and Apple has always been able to find a way to evolve,” – Angelo Zino
This is an area in which companies like Apple are artfully killing it. In the meantime, the market continues to look for early signs of a bottoming out or upturn. Investors are advised to be patient and look upon the firms, particularly giants like Apple, who stand strong in the face of adversity.