Index buyers: The past decade has seen indexing go from a modest niche to one of the most popular styles of investing. The explosive gains in assets under management for Vanguard ($5 trillion) and Blackrock ($6 trillion) attest to the strength of passive investing.
Apple is the biggest company in the Standard & Poor 500, the Nasdaq 100 and the Dow Jones Industrial average -- three of the best-known, most-followed indices. As such it captures the flow into index holdings, whenever markets rise. Apple accounts for almost 4 percent of the S&P 500 (its market cap is about $23 trillion); 4.9 percent of the price-weighted Dow; and over a whopping 11 percent of the Nasdaq 100 ($7.85 trillion).
New products: A slew of new and upgraded products are coming up. These usually drive the next cycle in Apple’s revenue, profits and ultimately price. New services, iPhones, AirPods, wireless chargers, over-the-ear headphones and home devices could be the spark that adds the next $100 billion in market cap.
I know, there are skeptics. There has been lots of skepticism about Apple for literally decades. The Mac site Daring Fireball has kept a running list of “claim chowder” -- all of the bad reviews of iPhones, iPads, Apple Watches, etc. that (incorrectly) forecasted disastrous sales. I see no reason this time is any different.
What factors could derail seeing a huge T in Apple’s market capitalization? Two quickly to mind:
The market not cooperating: We tend to forget that the overall market and a company’s sector are responsible for about two-thirds of its gains. If tech falls out of favor, or if the overall market rolls over, it will put a trillion dollars out of reach for Apple.
Apple comes in second: The most likely challenger in the race to a trillion would be Jeff Bezos and Amazon.com Inc. It has a market cap of $732 billion dollars -- and an infinitely higher valuation -- so it has a tougher road to travel. But I would not put anything past Bezos & Co., and it would not be the first time they saw a 35 percent gain in a year.
Cisco jinx be damned, I predict a better than 40 percent chance that Apple's trillion-dollar value will occur this year.
This column was provided by Bloomberg News.