Even after hitting a US$3 trillion market capitalisation on January 3, Apple stock has lost 13 per cent – its worst week since last February. But the falling dollar might be here to save the flailing corporation.
In the US, the S&P 500 has lost 11 per cent, which might be Apple’s saving grace.
Each time the company has hit a trillion-dollar milestone, the market has gone into a technical correction, with the dollar slump key to turning it around.
Apple hit the US$1 trillion mark in August 2018, sparking a 20 per cent technical correction in the S&P 500.
Two years later they saw US$2 trillion fly by as they helped fuel the tech wreck of 2020.
Most notably, the S&P reversed when the dollar weakened – and big tech led the way up.
It seems that in times of global turmoil, major US assets look like safe havens for international buyers, so investors look to big tech.
Still, the need for safety means assets may be overvalued. As a result, a weaker dollar acts as a gauge for foreign investors.
Dollars flowing into the US post-pandemic have largely been through tech, which has created an inverse correlation between the dollar and US equities.
According to Bloomberg, the correlation between their dollar index and Apple shares, acting as a sign for big tech shares, sits at 0.2. But during the depths of the past two corrections, the inverse correlation between the two assets was 0.18.
They insist the correlation isn’t stronger because it is normally preceded by dollar strength.
So keep an eye on dollar fluctuations. As it weakens, it will give foreign investors more incentive, and then the S&P 500 is likely to reverse the selling that has been a factor so far this year, with history indicating big tech – such as Apple – will be leading the charge.
