December 18th 2023, 6:00:51 pm

(about 2 months ago)

Apple market cap getting bigger than whole French stock market

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North American equities continue their recent rally, despite comments suggesting that rate cuts may not occur until March 2024. The S&P 500 has surged by 22.92% year-to-date, while the Nasdaq has reached a record high of 41.65%. In contrast, the Canada S&P/TSX Composite, as anticipated by the markets, underperformed, with a modest gain of 7.19%.

The driving force behind these market movements is the performance of seven US mega-cap stocks: Apple, Amazon, Alphabet, Meta, Microsoft, NVIDIA, and Tesla. Apple, in particular, has experienced a remarkable 59% surge in 2023, pushing its valuation to 3.08 trillion dollars—almost equivalent to the entire market cap of the French stock market. The company continues to break sales records, with a Price-to-Earnings ratio standing at 32.

The market rally is fueled by the belief that US Fed officials will lower rates early next year. However, recent statements and rate projections from the Fed suggest that it is too soon to consider rate cuts, with the earliest expected around May.

Nevertheless, equity markets are optimistic about a mild or nonexistent recession, leading investors to favor riskier assets, including stocks and cryptocurrencies. The policy interest rates in the US and Canada currently stand at 5.5% and 5%, respectively, translating to over 7% in house mortgage rates.

These high rates could pose challenges for Canadian households, especially considering a significant percentage of families approaching their renewal dates, potentially facing a tripling of their mortgage payments. Investors are hopeful that these circumstances may prompt officials to lower rates sooner.