Apple marked a grim milestone this week, falling about $1 trillion below a peak reached in 2022.
The company’s shares rallied in recent days, but the massive loss in value reflects difficult economic times for companies across the tech industry and beyond.
The tech-heavy Nasdaq plummeted by about one-third in 2022 while the broader S&P 500 fell 19% over that period. Apple’s performance, meanwhile, fell right in between those two indexes, dropping 27% over the course of the year.
The decline of a longstanding stalwart like Apple highlights trends that thrust the U.S. economy into uncertainty in 2022, leaving it in a precarious position as the new year begins, analysts told ABC News.
The forces that have squeezed Apple and the wider economy include a shift from pandemic-era consumption that flipped the fortunes of companies large and small, a near-historic rise in inflation that triggered an aggressive response from the Federal Reserve and supply chain disruptions that eased but persisted with zero-COVID lockdowns in China, analysts said.
“You’re talking about $1 trillion wiped out from the economy in one stock – it’s a big number and it isn’t something that should be ignored,” Angelo Zino, senior industry analyst at CFRA Research, told ABC News.
Apple did not immediately respond to a request for comment.
Why Apple lost nearly $1 trillion in value in 2022 and what it says about the state of the U.S. economy.
Tim Cook, chief executive officer of Apple Inc., speaks during a “First Tool-In” ceremony at the TSMC facility under construction in Phoenix, Dec. 6, 2022.
Bloomberg via Getty Images
Consumer tastes change as pandemic fears wane
Like many tech companies, Apple has suffered from a major consumer shift away from the pandemic-era focus on buying goods.
At the height of the pandemic, hundreds of millions across the globe facing lockdowns replaced restaurant expenditures with couches, exercise bikes and tech products. Over the first three months of 2021, for instance, Apple’s profits more than doubled compared to the same period a year prior.
“People were home buying computers, playing with gadgets and consumer electronics – all the things that Apple sells,” Mark Zandi, chief economist at Moody’s Analytics, told ABC News.
As pandemic fears have waned, however, consumers have prioritized spending on the experiences they missed out on while cooped up indoors. This fall, demand for personal computers plunged nearly 20% compared to the year prior, research firm Gartner found.
That change in taste has punished the bottom line of Apple and many tech firms, Zandi said.
“Since the pandemic has been winding down, people have been shifting spending away from consumer electronics to travel, restaurants and ball games,” he said.
Inflation rises and aggressive interest rate hikes follow
Apple has also faced challenges rooted in rapid price hikes and the Federal Reserve’s policy response, which has slowed some areas of the economy and pummeled the stock market.
At its peak, inflation reached 9.1% in June, a level last seen more than four decades ago. To dial back the rising costs, the Federal Reserve has undertaken an aggressive set of interest rate hikes.
An increase to the benchmark interest rate raises borrowing costs for consumers and businesses, which in theory should slash inflation by slowing the economy and eating away at demand. That means borrowers, whether businesses or individuals, have a harder time accessing loans, the lifeblood of economic activity.
Shoppers walk past the Apple store at the King of Prussia Mall, Dec. 11, 2022, in King of Prussia, Pa.
Mark Makela/Getty Images
Because interest rate hikes typically weigh on the economy and corporate earnings, investors flee. That pain is particularly acute for tech stocks like Apple because investors choose them in the first place for strong profit growth, which appears increasingly unlikely as interest rates jump, Zandi said.
“Investors are buying their stocks because of expected profit growth long into the future,” he said. “They get hit hard.”
High prices and rising borrowing costs can also weigh on consumers, eating away at savings and casting aside spending on items like iPhones or MacBooks.
Consumer spending proved resilient for much of the year due in part to savings from the pandemic, but the cushion appears to have dwindled in recent months. The personal savings rate fell to 2.3% in October, the lowest rate in nearly two decades, according to data from the Commerce Department.
“The state of the consumer is extremely important for a company like Apple,” said Zino, adding that the company could withstand a potential drop in consumer spending because products like the iPhone are treated by many as necessities.
Supply chain bottlenecks
Like a host of companies, Apple has struggled with pandemic-imposed supply chain disruptions that have hindered production and caused delivery delays.
While the worst of the global supply backup has eased, impediments remain, most notably in China.
The manufacturing behemoth’s “zero-COVID” policy has triggered intermittent shutdowns, forcing factories to close and production to halt.
“Apple has huge operations in China,” Zandi said.
At China’s biggest iPhone factory, in the central Chinese city of Zhengzhou, workers vanished over concerns that executives would impose a mandatory quarantine because of a recent COVID outbreak.
On the whole, China’s zero-COVID policy led to major iPhone shortages heading into the holidays, according to a report released by Wedbush Securities analyst Dan Ives last month. Shortages reached as low as 35% of typical holiday inventory in some stores, causing overall iPhone demand to outstrip supply by a ratio of 3 to 1, he found.
In recent weeks, China has relaxed its zero-COVID policy, offering a glimmer of hope for companies with major supply hubs in the country, like Apple, analysts said.
The China-related delays in the delivery of some iPhone models should be “largely resolved” by some point in January, Zino said.
While many expect a wave of coronavirus infections as the country reopens, manufacturing production could return to normal in the spring or summer of 2023, Zandi said.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
