Apple, Inc (NASDAQ:AAPL), Tesla, Inc (NASDAQ:TSLA) and Nvidia Corporation (NASDAQ:NVDA) were slipping over 3%, 4% and 5% lower, respectively on Friday in sympathy with the S&P 500, which was plunging almost 3%.
The CPI data released by the Labor Department showed the Federal Reserve is losing its fight against soaring inflation, which hit 8.6%, almost half a percentage point more than analysts estimated.
The technology sector, like some other sectors has perhaps taken the brunt of rising inflation and if a recession grips the U.S. economy, Apple, Tesla and Nvidia, which offer luxury technology, could continue to plummet.
Looking Back: Many investors may not have seen such a steep downturn on the horizon for 2022, especially when early January saw the S&P 500 reach a new all-time high of $4,818.62. That marked the top, however, and since that date the S&P has fallen 19%.
Traders and investors are always managing risk versus reward when deciding when to buy and when to sell stocks. The market is notoriously tricky and often moves in the opposite direction to what one may expect.
For investors holding a position in a stock at a loss, the decision on how to handle their investment can be difficult. This is where the investor must consider the time horizon for their investment - how long they’re willing to hold in the red before their position turns green again. They must also keep in mind, especially with positions in midcap and small cap stocks, a return to profitability could be years away and in the worst case, may never happen at all.
The Market Since COVID-19: The lockdowns and restrictions caused by the COVID-19 pandemic ushered retail traders into the stock market en masse. The stimulus the government injected into the population’s pockets and the stock market beginning in March 2020 created the perfect storm for a massive bull cycle that lasted nearly two years.
The Federal Reserve’s decision to hike rates and begin quantitative tightening marked the end of that bull cycle, however, and on March 14, the SPDR S&P 500 ETF Trust's (NYSE:SPY) 50-day simple moving average (SMA) crossed below the 200-day SMA, which caused a death cross to form, officially throwing the ETF into a bear cycle –the first bear cycle many retail traders have ever experienced.
The good news is that bear cycles are historically shorter than bull cycles and overall, on yearly timeframes, the market always goes up. For investors holding shares of Apple, Tesla and Nvidia, which have strong fundamentals, new all-time highs are most likely to come over the long-term. As for the current situation, here’s a look at how much $5,000 in Apple, Tesla and Nvidia purchased on Dec. 31, 2021 is worth now.
Investing $5,000 In Apple: Apple opened for trading on Dec. 31, 2021 at $178.09 and a $5,000 investment at the time would have purchased 28.07 shares. Apple currently trades at $138.15.
The $5,000 investment would be worth $3,877.87 today, representing a loss of 22.43%.
Investing $5,000 In Tesla: Tesla opened for trading on Dec. 31, 2021 at $1,073.44 and a $5,000 investment at the time would have purchased 4.65 shares. Tesla currently trades at $694.37.
The $5,000 investment would be worth $3,228.82 today, representing a loss of 35.31%.
Investing $5,000 Nvidia: Nvidia opened for trading on Dec. 31, 2021 at $296.74 and a $5,000 investment at the time would have purchased 16.84 shares. Nvidia currently trades at $171.11.
The $5,000 investment would be worth $2,881.49 today, representing a loss of 42.34%.