Most people will agree that a bear market is defined as a 20% dip from an all-time high. By this definition, Apple (AAPL) – Get Apple Inc. Report stock entered bear market territory in May 2022. But shares have long left correction mode, as the current price of $173 is only 5% below the January peak.
Is the current rebound in AAPL stock price the real deal? Will shares finally climb and move past the previous high, or will this prove to be nothing more than a short-lived bear market rebound?
Figure 1: Apple Stock: Is This Bear Market Rebound The Real Deal?
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(Read more from Apple Maven: Why Apple Stock Rallied After The Recent Interest Rate Hike)
Apple: delivering the goods
There is a qualitative argument to be made in favor of AAPL bulls. As discussed a few days ago on this channel, Apple has been delivering the goods and pleasing investors with flawless execution.
Even if the global economy is no longer white hot (far from it, in fact), the Cupertino company has enjoyed strong demand for its products and services. Supply chain constraints continue to be a manageable problem, but iPhone sales remain strong despite the odds.
Therefore, I would entertain the argument that Apple stock has seen the worst of 2022, since the shock of high inflation, rising interest rates, supply chain disruptions and geopolitical tensions have largely worn off by now. Apple came out the other end of the storm looking as strong as ever.
Then, there is the quantitative or historical part of the debate, which I address below. Is it normal for Apple stock to dip more than 20% as it did in May 2022; climb 33% in only two months, as it has since mid-June; then sink again to new 52-week lows?
How Apple stock behaves during bear markets
Apple is no stranger to bear markets. Despite AAPL stock having climbed a whopping 650% in the past 10 years, shares have dipped more than 20% from the peak several times. Here are the main instances, aside from 2022:
- Down about 45% between late 2012 and early 2013
- Down 30% heading into 2016
- Down roughly 40% very quickly, in Q4 of 2018
- Down a bit over 30% at the start of the COVID-19 crisis, in 2020
In all four examples mentioned above, the recovery happened relatively fast and without many false starts.
About 10 years ago, after finding a bottom in April 2013, AAPL climbed 16% quickly, but immediately tested its low. From there, the recovery was V-shaped, and the share price reached all-time highs again about 14 months later – for an enviable gain of 80%.
In 2016, the story was not much different. AAPL dropped to around $23 per share in February; climbed 17% fast; but U-turned and made a low in May of the same year. From that double-dip point, Apple stock roared back to an all-time high in a matter of 10 months, gaining 45% in the process.
In 2018, the bust and boom cycle was shorter: AAPL jumped some 45% from the year-end bottom in only 5 months. From there, an uncomfortable but short-lived pullback of 17% preceded a vicious rally that lasted from May 2019 to February 2020.
The COVID-19 bear was the most atypical of all. AAPL entered bear territory within only a few days in 2020, but the stock returned to all-time high a mere 10 weeks after finding the bottom of the well. The recovery was V-shaped through September of that year.
In conclusion: fear is probably overblown
History does not always have to repeat. But if it can serve as a guide, it is more likely that the recent recovery in AAPL share price is the beginning of a climb to peak levels and then past it, rather than a bear market rally that could crumble at any moment.
I continue to believe that now is a good time to own AAPL, despite the July and August rally that many market-timers have missed out. During periods of uncertainty and volatility, I think that holding quality (think AAPL, in this case) makes the most sense.
(Read more from Apple Maven: Apple Stock: It Could Benefit From Higher Interest Rates)
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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Apple Maven)
