Why investors should stop fixating on Apple and Tesla in 2023

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Thursday, January 5, 2023

Today’s newsletter is from Jared Blikre, a markets-focused reporter at Yahoo Finance. Follow him on Twitter @SPYJared. Read this and more market news on the go with the Yahoo Finance app.

Two trading days into the new year, and 2023 is already off to a rocky start for Apple ( AAPL ) and Tesla ( TSLA ), perhaps the two most important stocks for US investors.

While both stocks managed to finish with gains on Wednesday, they remain underwater in the new year after each new 52-week low on the first trading day of 2023.

Tesla’s 12% drop on Tuesday was its worst one-day performance since 2020. Apple’s year-to-date slump saw the iPhone maker lose its status as the last US tech giant with an equity market over 2 trillion dollars.

And while a new set of leaders is emerging in the S&P 500, history suggests that these two stocks aren’t likely to maintain their top-of-mind status for investors in the coming years.

Over the past three months, some of the biggest companies by market capitalization have seen shares hit the hardest, with Tesla leading the pack, losing 55%.

During that time, Amazon ( AMZN ) is down nearly 30%, while Apple and Alphabet ( GOOG , GOOGL ) are each down about 13%.

Compare that to the performance of some of the top names in the healthcare, financial and consumer sectors over the next quarter, and we can see the changing of the guard unfolding in real time.

Pharmaceutical company Merck ( MRK ) is up over 25% over the past three months, while major bank JPMorgan Chase ( JPM ) is up 20%, and consumer staples Procter & Gamble ( PG ) is up over 15%.

Historically, market leaders do not span multiple markets and decades.

The top five stocks at the height of the dot-com bubble in 2000 were Microsoft, Cisco ( CSCO ), General Electric ( GE ), Exxon Mobil ( XOM ), and Intel ( INTC ).

The story continues

According to research by Goldman Sachs, these names accounted for 18% of the S&P 500’s market value at the time. Today they make up only 8%.

Compare these names with the leaders at the start of 2022, which is increasingly seen as the end of the low interest rate era that lasted for more than a decade.

These leaders were Apple, Microsoft, Alphabet (GOOGL, GOOG), Amazon (AMZN), and what is now Meta Platforms (META).

This group achieved an astonishing 25% concentration in the S&P 500 around the start of the pandemic — a share that has already shrunk to 18% today.

Only Microsoft spans both eras, though even that is a bit misleading, as shares fell from the ranks of the market’s biggest names after the tech bubble burst, only to later re-emerge under Satya Nadella’s leadership at the end of 2010s.

Exxon Mobil is another interesting case.

The company gave Apple its crown as America’s largest public company in 2013. The stock was later battered by two oil crashes, first in 2014 and then in 2020. However, while crude oil has risen over the past two years , energy reserves have also increased. Now, Exxon is back in the top ten, dropping to eighth place.

Screens display trading information for ExxonMobil on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., December 9, 2022. REUTERS/Brendan McDermid

The remaining companies from the top five in 2000 – Cisco, Intel and GE – are still well below their record highs set more than two decades ago. GE, for its part, is stuck 85% below its 2000 record high; on Wednesday, its health care unit began life as a separate publicly traded company.

Of course, the future is not predetermined in any market environment, and investors will be looking to price in a host of game-changing unknowns this year.

Key to these unknowns will be a debate over whether or not the bear market is over, and when the Federal Reserve will finally roll over.

Regardless, investors are likely best served in the new year — and the new era — by keeping an open mind rather than fixating on yesterday’s broken leaders.

Even if the breakout leaders are household stocks like Apple and Tesla.

What you should watch today

The economy

7:30 a.m. ET: Challenger job cuts, year-over-year, December (416.5% over last month)

8:15 am ET: ADP Employment Change, December (150,000 expected, 127,000 long

last month)

8:30 a.m. ET: Trade balance, November ($-63.1 billion expected, -$78.2 billion last month)

8:30 a.m. ET: Initial jobless claims, week ended Dec. 31 (225,000 expected, 225,000 last week)

8:30 a.m. ET: Continued claims, week ended Dec. 24 (1.727 million last week)

8:30 am ET: S&P Global US Services PMI, Final December (44.4 expected, 44.4 last month)

8:30 a.m. ET: S&P Global US Composite PMI, Final December (44.6 last month)

gains

AngioDynamics (ANGO), Conagra (CAG), Constellation Brands (STZ), Helen of Troy (HELE), Walgreens Boots Alliance (WBA)

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