Why investors should stop focusing on Apple and Tesla in 2023

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Thursday, January 5, 2023

Today’s newsletter is from Jared Blikre, a market-focused reporter at Yahoo Finance. Follow him on Twitter @SPYJared. Read this and other market news wherever you are with 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), arguably the two most important stocks for US investors.

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

Tesla’s 12% drop on Tuesday was its worst one-day performance since 2020. Apple’s decline earlier this year saw the iPhone maker lose its status as the last US tech giant by market capitalization. more than $2 trillion.

And while a slew of new leaders are appearing in the S&P 500 Index, history suggests that these two stocks are unlikely to maintain their top status for investors in the years to come.

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

During this period, Amazon (AMZN) was down almost 30%, while Apple and Alphabet (GOOG, GOOGL) were each down around 13%.

Compare that with the performance of some key names in the healthcare, financials and consumer staples sectors over the past quarter, and we can see the changing of the guard playing out in real time.

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

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

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

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

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

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

This group reached a staggering 25% concentration in the S&P 500 at the start of the pandemic – a share that has already fallen to 18% today.

Only Microsoft covers both eras, although even that is a little misleading, as the title fell from the ranks of the biggest names in the market after the tech bubble burst, only to reappear later under Satya Nadella at the late 2010s.

Exxon Mobil is another interesting case.

The company ceded its crown as America’s largest public company in 2013 to Apple. Stocks were then decimated by two oil crashes, first in 2014 and then in 2020. However, as crude oil has surged over the past two years, energy stocks have also risen. Now Exxon is once again in the top ten list, sitting in eighth place.

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

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

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

Of course, the future is not preordained 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 the bear market bottom has been reached and when the Federal Reserve will eventually pivot.

Either way, investors will likely be better served in the new year — and the new era — by keeping an open mind rather than focusing on yesterday’s broken leaders.

Even if those broken leaders are household stocks like Apple and Tesla.

What to watch today

Economy

  • 7:30 a.m. ET: Job cuts at challengersyear-over-year, December (416.5% in prior month)

  • 8:15 a.m. ET: Job change at ADPDecember (150,000 expected, 127,000 during

  • last month)

  • 8:30 a.m. ET: Trade balanceNovember (-$63.1 billion expected, -$78.2 billion in prior month)

  • 8:30 a.m. ET: Initial jobless claimsweek ended December 31 (225,000 expected, 225,000 the previous week)

  • 8:30 a.m. ET: Continuing claimsweek ended December 24 (1.727 million in previous week)

  • 8:30 a.m. ET: S&P Global US Services PMIDecember final (44.4 expected, 44.4 in previous month)

  • 8:30 a.m. ET: S&P Global US Composite PMIDecember final (44.6 in previous month)

Earnings

  • AngioDynamic (ONGO), Conagra (GAC), Constellation Brands (STZ), Helen of Troy (EVERYTHING), Walgreens Boot Alliance (WBA)

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