In 2022 US equity markets had their worst year since 2008. The S&P lost just under -20% of its value, whilst losses for the Nasdaq 100 were closer to one-third.
A significant contributor to that underperformance was technology and growth stocks, particularly the mega caps, which in the boom times had led the market higher, but which had precisely the opposite effect over the last 12 months.
The chart above plots the percentage change in two of the best-known and most widely followed mega-cap tech names, Apple (AAPL) and Tesla (TSLA), during 2022.
Apple which is among the world's largest and most profitable companies, fell by -28.61% whilst Tesla, which is perhaps the ultimate growth story, declined by more than -69.0%.
Both stocks have fallen further in the early days of 2023 so what exactly has happened here?
Before we try to answer that question let's look at the 2022 performance of a wider universe of growth stocks, for example, those tracked by the Invesco S&P 500 Pure Growth ETF. Which trades under the ticker RPG.
The ETF tracks a basket of stocks, within the S&P, which exhibit “strong growth “ characteristics.
RPG returned -27.56% in 2022, a performance that’s not dissimilar to that of Apple, but well above that of Tesla.
One reason that RPG performed so much better during 2022 was its exposure to the energy sector, with around 30.0% of the fund invested in energy stocks. The S&P 500 energy sector rallied by more than +54% last year.
That weighting highlights the fact that growth stocks don't exclusively come from the world of technology, and that growth investors and traders have opportunities outside of software and microchips.
Looking specifically at Apple the stock became a victim of its success.
Traders took the view that it wouldn't be possible for the company to continue to grow as quickly as it had previously.
Particularly, if the global economy entered a recession in 2023, as many, analysts are predicting.
Those issues were compounded by a series of lockdowns in China, that hampered the production of Apple's latest products, such as the iPhone 14, ahead of the key holiday shopping season.
That meant that in Mid-November the average wait time for an iPhone 14 pro, ran to 34 days. An interval that analysts at UBS described as extreme.
The fact that there is such strong demand for Apple’s flagship phone is a positive, but the notion that this demand went unsatisfied, in a key quarter, is a big negative.
Turning to Tesla it's almost impossible to separate the fortunes of the EV maker from the antics of its high-profile CEO Elon Musk.
That task became even harder last year as Mr Musk took control of Twitter, using a large portion of his Tesla holdings as collateral, against loans which financed the takeover.
And then seemingly spending more time focusing on his acquisition, rather than on his day job at Tesla.
Elon Musk sold around $5.70 billion worth of Tesla stock during November and December. That followed on from significant stock sales in April and August last year.
The fall in Tesla’s stock price meant that the world's richest man became the first person in history to see their net worth fall by -$200 billion in a single year.
For a long-time Elon Musk couldn't put a foot wrong, but in 2022 he couldn't seem to get anything right. And any action he did take was always in the spotlight of both financial and social media.
Tesla updated the market on Tuesday and reported record deliveries of 1.30 million new vehicles in 2022, a figure that was 40% higher than that seen in 2021.
Despite that Tesla stock sold off by another -12.0%, why? quite simply it undershot Wall Street estimates for production in the final quarter of 2022.
Greek mythology warns us about the perils of flying too close to the sun. Icarus ignored those warnings, his wings melted, and he plunged into the sea.
Mega-rich South African CEOs take note.
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