When Apple Becomes the Forbidden Fruit

June 15, 2022 | Catherine Callaghan, Associate Research Analyst

For much of the last two years, big name tech stocks had been tantalizing fruit for investors willing to pay up for growth. Enter 2022. After peaking on January 4th, the S&P 500 has taken a nosedive, led by those same tech stocks. Since 2018, the Information Technology sector has grown from a 20.1% weight in the S&P 500 to 26.8%, setting it up to now have an outsized impact as equities correct. The largest detractors year-to-date, regardless of GICS sector classification, have business models and value propositions rooted in technological advancement and innovation. The top eight detractors this year are Apple, Microsoft, Amazon, Alphabet, Meta, Tesla, NVIDIA, and Netflix. These eight stocks have cost the index more than 800 basis points year-to-date, almost half of the S&P 500’s -17.6% return.¹

Behind the outsized correction in technology stocks are macro headwinds and rising rates. The instability caused by the Russia/Ukraine war, COVID-related shutdowns in China, ongoing supply chain disruptions, and heightened inflation has led to shifts out of longer-duration growth stocks towards the perceived safety of assets like gold and value stocks. Rising rates are weighing on growth stock multiples and increasing recessionary concerns are reducing confidence in outyear earnings projections. Uncertainty is high and sentiment is weak, and while risks certainly remain, that may eventually help support a market bottom. Up or down, large tech stocks will continue to have a meaningful impact on broader market returns.

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¹As of June 10, 2022