The US Presidential election is over – although the vote counting is not. On the trading day following November 3, Apple surged 4%. This was the stock’s fourth best day since May.
Why did shares perform so well, as the results of the election remain highly uncertain? Also, could the stock continue to climb, possibly towards its all-time high of around $135 per share?
It was probably not about policy at first…
I wrote a couple of days ago about how Apple shares, contrary to my initial suspicion, tend to underperform in the month and year following a US Presidential election.
To be fair, I also explained that the lack of traction may have much more to do with coincidence than politics (see video above). In either case, judging by historical trends alone, November 4 was an atypical day for Apple.
I suspect that the market’s knee-jerk reaction to bid up Apple shares had little to do with policy, at least at first glance. Think about the Nasdaq futures, which shot through the roof between 7 p.m. and 10 p.m. EST on Tuesday. That was around the time that a “blue wave” (that is, a landslide win by the Democratic candidates) became clearly unlikely, and a contested dispute for the White House much more probable.
Without a “blue wave”, new policy enactment will become tougher in 2021. If this is the case, the economy may struggle a bit more to recover, especially if additional fiscal stimulus gets delayed further due to a White House-Senate gridlock. This may help to explain why Nasdaq futures gained so much in the evening, while Dow Jones futures, representing the old-school economy, did not.
Therefore, I think that Apple spiking on Wednesday had a lot to do with stock investors fleeing to what has been perceived as safer bets in the market: growth, tech-heavy names like Apple.
… But maybe about policy on second thought
On the other hand, a flight to safety may not tell the full story. Another plausible explanation for Apple being up 4% has to do with antitrust regulation.
As the votes continue to be counted, it has become increasingly evident that the White House is likely to go blue, while the Senate is likely to remain red. If confirmed, this dynamic will probably get in the way of Washington being effective at coming after Big Tech for antitrust matters – as I had laid out in my “What If Biden Wins?” post.
Here is one quick way to test the hypothesis. Few will disagree that Apple and Microsoft are the least likely to be haunted by antitrust scrutiny. On the other hand, Amazon, Alphabet and Facebook have a target on their backs.
Maybe it is not a coincidence that, on November 4, the most at-risk companies from an antitrust perspective saw their stocks rally the most. While Apple and Microsoft were up less than 5% for the day, the other three FAAMG names climbed at least 6% and as much as 8%.
Will Apple keep climbing?
The question of whether Apple will continue to rise is, as usual, a tough one to answer. Generally speaking, I believe that stocks will rebound following this tumultuous election cycle. Worth noting, Apple is still down 14% from its peak, although well off the October-November lows.
Better than trying to guess the future, I think Apple investors are best served by keeping a long-term horizon in mind. As Jim Cramer has said repeatedly, and as I have argued myself, Apple is a stock to own, not to trade.
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