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Why investors should stop fixating on Apple and Tesla in 2023




This article first appeared in the Morning Brief. Get the morning brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe

Thursday 5 January 2023

Today’s newsletter is by Jared Blikre, a reporter focused on the markets 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 ), arguably the two most important stocks for US investors.

While both stocks managed to close higher on Wednesday, they remain underwater in the new year after hitting new 52-week lows on the first trading day of 2023.

Tesla̵[ads1]7;s 12% drop on Tuesday was its worst one-day performance since 2020. Apple’s decline to start the year saw the iPhone maker lose its status as the last US tech giant with a market capitalization above $2 trillion.

And as a number of new leaders emerge in the S&P 500, history suggests that these two stocks are unlikely to retain 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%.

Over 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 key names in the healthcare, financial services and consumer goods sectors in the last quarter, and we can see the changing of the guard unfolding in real time.

Pharmaceutical company Merck (MRK) is up more than 25% over the past three months, while major bank JPMorgan Chase (JPM) is up 20%, and 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 dot-com 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 S&P 500’s market capitalization at the time. Today they make up only 8%.

Contrast 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 more than a decade.

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

This group achieved an eye-popping 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 somewhat misleading, as its stock fell from the ranks of the market’s biggest names after the tech bubble burst, only to re-emerge under Satya Nadella’s leadership in the late 2010s.

Exxon Mobil is another interesting case.

The company relinquished its crown as the largest US public company in 2013 to Apple. Stocks were later decimated by two oil crashes, first in 2014 and then in 2020. But as crude has risen over the past two years, so have energy stocks. Now Exxon is back on the top ten list, sitting in eighth place.

Why investors should stop fixating on Apple and Tesla in 2023

Monitors show the 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 of more than two decades ago. GE, for its part, is stuck 85% below its 2000 record; On Wednesday, the health department began life as a separate listed company.

Of course, the future is not predetermined in any market environment, and investors will look to price in a number of unknown game-changers this year.

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

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

Although the broken leaders are household stocks like Apple and Tesla.

What you should see today

Economy

  • 7:30 a.m. ET: Challenger Job Cutsyear-over-year, December (416.5% last month)

  • 8:15 a.m. ET: ADP Employment ChangeDecember (150,000 expected, 127,000 during

  • last month)

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

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

  • 8:30 a.m. ET: Continuing requirementsweek ended December 24 (1.727 million last week)

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

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

Earnings

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

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