The combined value of all Apple stocks is greater than the sum of an index of 2,000 small stocks. It is a sign that investors are traveling to places where they can weather the economic downturn. Apple’s market capitalization, a measure of the value of all its shares, was $2.714 trillion on Monday, according to FactSet. That’s greater than the combined market capitalization of all 2,000 shares of the small-cap focused Russell 2000, which was at $2.208 trillion. Market participants said the move is symbolic of a broader favoritism toward large-cap stocks this year, as investors try to predict when rate hikes will end and whether the economy will head into recession. “It’s apples to oranges — or minicaps,” said Willie DeWitch, founder of High Mount Research. “It’s not just that Apple has been stronger than the smaller companies. Apple has been strong while the small companies have been weak.” DeWich said stocks underperformed in the Russell 2000 this year because smaller companies are usually more sensitive to the health of the broader economy, which is now in question as fears of a recession grow. The index is holding steady so far, underperforming the broad S&P 500, which has gained more than 7%. Meanwhile, Apple stock rose more than 32% as investors bet on the return of technology and other growth stocks in the hope that the Federal Reserve will reverse course on interest rates. Delwiche said investors are buying into Apple and other big names as a kind of “safety trade,” looking for defensive areas in the market when names typically seen as safer don’t perform as expected. Both the telecom services and information technology sectors of the S&P 500 are up more than 20% since the start of 2023, while utilities and real estate — both of which he described as defensive goods in a typical market — are down in the year. But the strength of Apple and other huge stocks like Microsoft that led the S&P 500 this year could mask a lack of breadth that could cause problems down the road, he said. “You have market generals leading, and instead of the military following behind you, the military is standing on the sidelines and saying, ‘Uh, I don’t think we’re going to take the field now,'” DeWitch said. “That’s where you get the problem for the rest of the market. The longer the broader market is not involved, the greater the risk that one of the leaders is exposed, and then you have a broader correction.” AAPL .SPX, .RUT YTD Mountain Apple, S&P 500, Russell 2000 year-to-date. That The first is “much cheaper,” which could lead to better annual returns over the next decade. She also noted that small caps should be helped by multi-year trends such as the US capital spending cycle, relocation, and peak globalization. However, she said Carrie Hall said she is “tactically cautious,” given concerns about the health of regional banks in the wake of the industry crisis and the possibility of changes in lending standards.In small-company names, Stephen D. Sanctis, an equity analyst at Jefferies, said investors should look at the companies. The cyclical though group has eased in recent months as investors lessen their focus on the possibility of a recession.This is because investors are looking to 2020 and 2018, he said, for insight into how to position themselves ahead of expected rate cuts.DeSanctis said this is the wrong way forward. to think about the market. He thinks rates may stay higher for longer, which leads him to prefer cyclical companies over growth stocks that are particularly rate-sensitive. He also noted that the burden of the debt ceiling could add more pressure on smaller companies, given their poor performance over a similar period in 2011. But he said this environment is better given the negative sentiment that has already pushed stocks lower. “If things go right for small businesses or the market as a whole, small can have a really nice bounce,” he said.
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