It’s been a strong — and long-awaited — run for Apple Inc. (NASDAQ:AAPL) stock. AAPL stock is up 19% year-to-date as of this writing, and has gained by about one-third since the U.S. presidential election. Apple stock struggled for some time, hitting an 18-month low below $90 in May. But clearly investor sentiment has turned.
Of course, overall investor sentiment has improved as well. Broad markets have strengthened in 2017 and since the election. The Dow Jones Industrial Average — as imperfect a measurement as it is — cleared 21,000 on Wednesday. But AAPL stock itself has been a major driver of those broad market gains.
Just how much Apple stock — and, to a lesser extent, issues of other titans such as Amazon.com, Inc. (NASDAQ:AMZN) — has moved those indices might surprise you.
How Apple Stock Impacts the S&P 500
The S&P 500 is up 6.9% year-to-date as of this writing. That index consists of the 500 most important stocks in the U.S. market (not necessarily the largest), and comprises 70%-80% of total U.S. market capitalization, according to Standard & Poor’s itself.
It would thus seem that AAPL on its own couldn’t move the index all that much. After all, 1 out of 500 is a small fraction, even as big as Apple is. Yet Apple stock still drives about 3.6% of the index’s returns.
Given a 19% YTD return, then, Apple alone has pushed the S&P 500 higher by about 0.69% in just two months. Fully one-tenth of the broad market index’s growth has come just from AAPL.
And Apple isn’t the only large-cap driver. AMZN stock, now up 9% for the year, has added 0.2 points, or 3%, of the index’s growth. The three largest financials in the index — JPMorgan Chase & Co. (NYSE:JPM), Wells Fargo & Co (NYSE:WFC) and Bank of America Corp (NYSE:BAC) — have added roughly 7% of the S&P 500’s performance so far in 2017.
In other words, roughly 20% of the broad market’s gains in 2017 from come just from five major stocks. And the figure since the election is actually above one-quarter, with the three major financials creating 15% of the S&P’s 12%-plus post-election gains.
That’s not to say that market strength is a mirage. Fully three-quarters of S&P 500 stocks are positive in 2017 as of this writing. But it has been a more top-heavy market than usual — and the impact of Apple stock, in particular, is even higher in other well-known indexes.
AAPL and the Dow Jones Industrial Average
The DJIA is different from most other indices in that it’s weighted by price, not market value. The most heavily weighted component in the Dow is Goldman Sachs Group Inc (NYSE:GS), because its stock price is over $250. The least important Dow Jones component is General Electric Company (NYSE:GE), trading just above $30.
Yes, it’s weird.
That means Apple stock actually has the seventh-highest weighting in the DJIA. (AMZN isn’t even excluded, because of its $800-plus handle.) But Apple’s strong gains still mean that it has driven over 12% of the Dow Jones’ year-to-date increase.
Apple isn’t alone in driving the index. Boeing Co (NYSE:BA) has added another 12%, GS roughly 9% and JPM another 8%. Again, the gains are somewhat concentrated; over 40% of the Dow’s year-to-date increase is coming from just these four stocks.
Still, like in the S&P 500, the gains are broad-based. Only four Dow components are in the red in 2017, including the two energy issues. Exxon Mobil Corporation (NYSE:XOM) and Chevron Corporation (NYSE:CVX) both have declined in 2017. But the 7% increase YTD has come in large part from just a few stocks — and, like the S&P 500, the same is true since November.
Apple and the Nasdaq-100
The Nasdaq-100 is a tech titan-heavy index. Thus, it should be no surprise that AAPL stock has a major weighting in the index. Apple represents almost 12% of the Nasdaq-100 — the year’s best-performing major index so far, with an increase just under 11%.
Apple stock has been the major driver, accounting for over 20% of that growth. Facebook Inc (NASDAQ:FB) has added another 9%, as has AMZN.
Some 40% of the index’s YTD gains have come from those three stocks. And they haven’t had as much help from their fellow tech titans. Alphabet Inc (NASDAQ:GOOGL) and Microsoft Corporation (NASDAQ:MSFT) actually have lagged the Nasdaq-100 so far this year. That might be a good thing if those stocks pick up the pace – but it does leave the index somewhat reliant on just a few key issues.
Of course, that’s the nature of the Nasdaq-100, relative to the S&P 500 in particular, which has more stocks and a broader mandate.
But no matter the index, Apple stock is important. And that just shows how embedded it is in the U.S. investing world. Pretty much every index has significant exposure to AAPL — which means that most diversified investors own Apple in some way, shape or form.
The strength in the broad markets in 2017 hasn’t come solely from AAPL stock — but it has helped. And long investors — even those who don’t own Apple shares directly — should be rooting for Apple to keep climbing.
The author has no direct positions in any securities mentioned … but like most investors does own index funds which include securities mentioned, including AAPL.