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Apple stock (AAPL) – Get Report continues to trade around $125 apiece, and a charge back to late January all-time highs has failed to materialize. Investors who got used to seeing the value of their Apple positions rise by well over 50% in 2019 and 2020 must be anxious for the next leg higher.
The Apple Maven believes that a rally off current levels could be imminent. Below are three reasons to support optimism on AAPL shares over the next few weeks or months.
Yields have stabilized
One of the most significant market movers as of late, especially for growth stocks, has been yields. Medium- and long-term interest rates have moved higher in the past year, more so earlier in 2021, largely due to expectations for reheated economic activity leading to higher inflation.
Think of mid-May, when the 10-year treasury yield returned to its 52-week high. At that point, Apple stock sold off sharply and returned to August 2020 levels. Worth highlighting, nothing appeared particularly wrong with the company’s fundamentals, and the only bearish company-specific development seemed to be the legal battle with Epic Games threatening the App Store.
Now, yields have stabilized (see chart below, in green). The 10-year rate breached 1.7% in March, just as AAPL shares approached their 2021 lows. Since then, yields have come down about 15 basis points, and the five-year forward implied inflation seems to have plateaued at a 10-plus-year high of 2.7%.
As the saying goes, lack of bad news can be good news. With yields and inflation having found a point of stability, a major macroeconomic threat to Apple stock seems to have gone dormant, which could be constructive for the Cupertino company’s share price.
Drawdowns have not lasted very long
The value of Apple stock, just like any other risk asset, tends to fluctuate. Sometimes, these movements lead to sharp drawdowns – i.e. a decline from a peak. AAPL is currently more than 12% below its all-time high, and shares have not reclaimed the top in 88 days and counting.
In the past decade, Apple stock stayed in a drawdown for as long as 450 days. Therefore, the current decline is…