As Goes Apple, So Goes the Market?

With the stock markets down almost (OMG!) 5 percent from their all-time highs, lots of folks are looking for signs that the bull is dying, if not dead. One of the more portentous omens is the recent decline and volatility of Apple’s stock.

Or so it seems.

For reasons too numerous to list here, Apple captures an enormous amount of mindshare. I find that gratifying, as a fanboy since falling in love with a Mac Classic in 1988. I have jokingly noted that the five major asset classes are stocks, bonds, real estate, commodities and Apple. However, too many people seem to think it is the most important stock in the universe. Even if that were true, that doesn’t help us understand how markets work.

Of course, Apple is important. It had annual sales of $183 billion in the fiscal year that ended last September, almost 100,000 employees, some of the most successful retail stores ever and more than $200 billion in cash and liquid investments. It also is the world’s largest music retailer, reaps almost all of the profits in the mobile phone market and, of course, has a fanatical level of brand loyalty.

Apple’s influence is largely a function of its outsized weighting in various indexes. It is the largest component in the Standard & Poor’s 500 Index at about 3.62 percent. In the Nasdaq 100 Stock Index, it’s even more influential at 12.85 percent — that’s not quite double Microsoft’s weighting, the next biggest component, and almost three times the size of Amazon, at 4.76 percent. Apple ranks seventh in terms of influence in the Dow Jones Industrial Average, which uses a price weighting, meaning that companies with higher absolute share prices (but lower valuations), such as Goldman Sachs and IBM, have a greater impact.



Continues here: As Goes Apple, So Goes the Market?


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  1. Whammer commented on Aug 17

    Another reminder of how dumb the Dow average is. But you knew that already ;-)

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