16 December 2021
Is Apple the new safe-haven asset?
As the world is experiencing a high level of unrest and instability, even traditional safe-haven assets don’t seem so safe anymore. With gold declining and the US dollar pressured with high inflation rates, the most sought-after safe-haven assets have failed to serve their purpose as well as they normally would.
On the other hand, Apple stocks have been on a tear since March 2020, when the world was still trying to come to terms with the Covid-19 pandemic. Apple is now valued at $2.97 trillion in market capitalization, making it the world’s most valuable company, and in a few days, perhaps the first ever to hit the $3 trillion mark.
Is Apple a new safe-haven asset in the making? A safe haven that also tends to consistently outperform the market and offer protection against inflation?
Apple’s performance in 2021
Apple’s stock undoubtedly had a stellar year, gaining more than 40% year-to-date and leading the tech stock rally amid the pandemic and inflation concerns. The stock is currently trading near $180, which means the $3 trillion milestone is only a few extra dollars per share away, and analysts say a price target of $200 may even be too conservative for Apple in 2022.
In fact, in the last month alone, the company’s stock soared by 20%. At the risk of comparing apples to oranges, during this period, Nasdaq and the S&P 500 rose by 0.20% and 0.19% respectively, while gold (XAUUSD) dipped by 4%.
Whether you love or love to hate Apple, its performance these past few years has been nothing short of exceptional, and only a few of its peers can hope to match it.
Microsoft came close, a bit earlier in the year, due to the unavoidable supply chain shocks in the semiconductor industry. But Apple has outpaced it at every step, becoming the first company to join the $1 trillion club as well as the first to make it to $2 trillion, and now – well you get it.
The latest financials from Apple show earnings of $1.24 per share in Q4 2021 and revenues upwards of $80 billion – a near 30% improvement year-over-year.
Is Apple the new safe-haven asset?
Nobody likes high inflation. When inflation gets out of control, companies have to deal with higher borrowing costs as well as higher costs on labor and manufacturing – costs that the company will either need to bear or push on to consumers.
Of course, Apple has little to worry about this since its products’ luxury status and closely-knit ecosystem of apps and devices command the lion’s share of the market as well as supplier prices.
Also, if anything, Apple raising the prices of its offering would only serve to enhance its premium status amid its loyal fanbase.
The company is constantly innovating with high-end hardware and its proprietary Arm-based M1 chip, released in November 2020 - in a bid to reduce the company’s dependence on third-party chips - further catapult sales and brand loyalty due to its surprising performance and efficiency.
The demand for Apple’s hardware – iPhones, iPads and iMacs has only increased due to the lockdowns and its services such as Apple TV+ is enjoyed by hundreds of millions of new subscribers every year.
As such, Apple has proven not only to be highly profitable and consistent during one of the most volatile periods for the financial markets, but also one of the most promising tech stocks to follow in a post-pandemic world and beyond.
Investors who are looking for assets with greater resistance to inflation and potentially greater returns would do well to keep Apple on their watchlists.
Its performance over the last five years has shown that it performs much better than gold during periods of uncertainty while still offering relative safety against inflation.
The upside for Apple is also virtually unlimited, with the company expected to announce more of its plans regarding electric vehicles and autonomous driving projects as well as its virtual reality devices.
However, we should always remember that past performance is not an indicator of future success. The company’s stock could very well beat expectations and rally beyond the $200 per share consensus, but any price above that could prove unsustainable in the short term.
Also, Apple has recently announced that demand for its latest iPhone lineup is waning, which may be attributed to a number of factors such as the looming economic crisis, supply shortages, delivery delays as well as the new omicron variant.