Apple stock has generally shown steady growth, driven by robust demand for its iDevices, expanding margins, and share buybacks that have boosted per share earnings. However, the outlook may be turning uncertain as President Donald Trump reinforces his protectionist stance by imposing tariffs on the United States’ key trading partners—including China, Mexico, and Canada. This development poses a significant risk to Apple, which manufactures most of its products, including Macs, iPads, and iPhones, overseas.
In a downturn, Apple stock might suffer significant losses. Evidence from as recently as 2022 shows that it dropped by over 30% in just a few quarters. Could Apple’s $235 share price decline to around $160 if a similar scenario unfolds? Naturally, individual stocks tend to be more volatile than a diversified portfolio—so if you’re seeking upside with less volatility than holding a single stock, consider the High-Quality portfolio, which has outperformed the S&P 500 and delivered returns of over 91% since its inception.
Why is this significant now? Apple has been steadily expanding its business through innovative products and a booming services segment. However, the current trade war introduces increased risks that must be considered.
President Trump raised the tariff on goods from China from 10% to 20%, in addition to existing duties. Since China is estimated to account for 90% of Apple’s iPhone production, according to S&P Global, this move is likely to significantly affect U.S. customers and, consequently, Apple’s sales. Although the company managed to avoid the 10% tariffs during Trump’s first term, it remains uncertain whether it can do so again. While Apple has committed $500 billion in U.S. investments and plans to hire 20,000 workers domestically, these initiatives will take several years to materialize. If Trump’s tariffs are applied to Apple’s products, the resulting costs will have to be absorbed by either Apple (through reduced margins), its customers (who would pay more for their iDevices), or wireless carriers (which might pass on the burden via higher device subsidies). In any case, if the tariffs are enacted, Apple’s sales volumes or profit margins could be adversely affected.
Trump’s aggressive policies on tariffs and immigration have also raised concerns about a potential resurgence of inflation. As a result, the U.S. economy might face significant challenges—and possibly a recession—as explained in our analysis on the macro picture. When you factor in the heightened geopolitical uncertainty from the new Trump administration’s bold actions, these risks become even more critical. Moreover, with the ongoing Ukraine-Russia conflict and uncertain trade conditions, tariffs that raise import costs tend to lead to higher prices, lower disposable income, and reduced consumer spending. This is particularly unfavorable for Apple, which relies heavily on discretionary spending. Additionally, as smartphone feature upgrades become more incremental, consumers in a fragile economy are likely to hold on to their devices longer—potentially hurting Apple even more.
How resilient is AAPL stock during an economic downturn?
AAPL stock is often seen as a safe haven and has been more resilient than the benchmark S&P 500 index during some recent downturns. Concerned about how a market crash might affect AAPL stock? Our dashboard How Low Can Apple Stock Go In A Market Crash? provides a detailed analysis of the stock’s performance during and after previous market crashes.
Inflation Shock (2022)
- AAPL stock fell 30.8% from a high of $182.01 on 3 January 2022 to $126.04 on 28 December 2022, compared to a peak-to-trough decline of 25.4% for the S&P 500
- The stock fully recovered to its pre-Crisis peak by 12 June 2023
- Since then, the stock has risen to a high of $259.02 on 26 December 2024 and is currently trading at around $235
Covid Pandemic (2020)
- AAPL stock fell 30.7% from a high of $80.91 on 19 February 2020 to $56.09 on 23 March 2020, compared to a peak-to-trough decline of 33.9% for the S&P 500
- The stock fully recovered to its pre-Crisis peak by 3 June 2020
Global Financial Crisis (2008)
- AAPL stock fell 60.9% from a high of $7.14 on 30 December 2007 to $2.79 on 20 January 2009, compared to a peak-to-trough decline of 56.8% for the S&P 500
- The stock fully recovered to its pre-crisis peak by 21 October 2009
Premium Valuation Amid Slowing Growth
In summary, it doesn’t help that Apple’s stock remains expensive, trading at nearly 34x consensus FY’25 earnings. To make matters worse, Apple’s Revenues have only grown marginally in recent years. Apple’s top line has increased at an average rate of 2.3% per year over the past 3 years, compared to 9.8% for the S&P 500.
Given this deceleration in growth and the broader economic uncertainties, ask yourself the question: do you plan to hold onto your Apple stock now, or would you panic and sell if it starts falling to $200, $160, or even lower? Holding on to a declining stock is never easy. Trefis collaborates with Empirical Asset Management—a Boston-area wealth manager—whose asset allocation strategies yielded positive returns during the 2008-09 period when the S&P lost more than 40%. Empirical has integrated the Trefis HQ Portfolio in this asset allocation framework to provide clients better returns with less risk compared to the benchmark index; a less volatile alternative, as shown in the HQ Portfolio performance metrics.
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