Saudi Aramco has just become the world’s most valuable stock, even though Apple’s market value was almost 60% higher than that of the state-run oil giant at the start of the year. That just goes to show how quickly and dramatically the stock market sectors have rotated this year, with tech stocks tumbling from their pandemic-fueled highs and energy stocks surging from their lows.
A lot of that was down to rapidly rising energy prices, which have boosted Aramco’s revenue significantly. Those rising prices haven’t just worked in Aramco’s favor either, but against Apple: nice-to-haves like iPhones are the first things to go when customers need to pay more at the pump, after all. Keep in mind too that the Federal Reserve has been hiking interest rates, which is making borrowing more expensive for American companies like Apple – as well as for its customers who, again, are less likely to stump up for new gadgets.
Energy stocks will probably keep outperforming tech stocks for a while, given that rate hikes and supply chain issues aren’t going anywhere fast. Still, you don’t have to just choose one or the other: overweighting energy stocks makes sense in this environment, but so does keeping a small exposure to tech stocks in anticipation of when the market rotates back in their favor. Because as we’ve just seen, it can creep up on you in next to no time.
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