The setup couldn’t have been worse for Apple stock (AAPL) – Download Apple Inc. (AAPL) report. On the day the Federal Reserve released the minutes from its last meeting, bond yields fell on the Moon and stocks moved lower in fear of rising rates and inflation. This is bad news, especially for rising stocks.
However, shares of AAPL managed to end the day higher by 0.4%. Apple Maven believes the resilience of shares of the Cupertino-based company, which is still under water since reaching its highest levels in January, faced adversity, suggests the mood is positive and the AAPL could climb to the top from here.
Read more from Apple Maven: What Jim Cramer says about Apple stocks after WWDC
On Wednesday, June 16, the Federal Reserve’s Open Market Committee (FOMC) concluded a two-day meeting on monetary policy. It was an important landmark, as the Central Bank officially began to “think about thinking” about raising rates – earlier than previously expected, 2023.
Apple Maven explained why higher returns are bad news for rising stocks like the AAPL. First, monetary tightening is negative for consumption, everything else remains constant. Second, the higher discount rate makes Apple’s far-reaching financial results less valuable in terms of present value.
Read more from Apple Maven: Why Goldman Sachs changed its mind on Apple stocks
Stock avoids the bullet
Despite the Fed clearly signaling an increase in short-term rates, even if not immediately, Apple shares fully recovered from the initial shock on Wednesday. This could mean that the impact of a higher-yield environment is already included in inventories, which remains 9% below peak levels.
If the assumption is correct and Apple will no longer suffer from rising rates, stocks could start to be more affected by the company’s business fundamentals that remain healthy: the current 5G upgrade cycle, renewed demand for M1-based Mac and iPad, and a growing service segment.
Apple Maven strengthens the belief, announced on June 3 (the then AAPL price of $ 123.50), that Apple shares are ripe for the rally. The reasons, other than a solid business foundation, remain the same:
- Yields could continue to rise, but Apple shares have proven resilient – at least this time;
- The current withdrawal has taken too long, given the strong financial results in recent times;
- Summers have been good for the AAPL, as enthusiasm for the holiday season can emerge.
On the above list, two more factors need to be considered:
The Federal Reserve announced an increase in short-term interest rates on Wednesday, June 16, albeit only until 2023. How did the announcement affect your view of Apple shares? Leave your vote below and follow @AppleMaven on Twitter!
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(Disclaimer: This is not investment advice. The author may have one or more shares listed in this report. The article may also contain affiliate links. These partnerships do not affect editorial content. Thanks to Apple Maven for support)
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