The Exchange

Monday - Friday, 1:00 - 2:00 PM ET
The Exchange

Kelly Evans: The $12 trillion that vanished

Scott Mlyn | CNBC

It's one thing when Tesla's stock keeps tanking. Elon Musk, the inventory glut, EV demand faltering, blah, blah, blah. But Apple? The most successful company of the 21st century? Its shares slid to a new 52-week low again this morning, around $127. That's a 30% drop from the highs this year. The company is now worth barely over $2 trillion, down from $3 trillion at its January peak. 

So that's a trillion dollars of Apple wealth that has vanished this year. Tesla? Nearly another trillion. In fact, if you include Tesla with the rest of "big tech," (Apple, Amazon, Alphabet, Microsoft, Meta) that's a loss of nearly $5 trillion in value, just this year. A mind-boggling sum. It's amazing there haven't been more blow-ups as a result. 

And that's not all! The S&P 500 as a whole has lost $8 trillion, and the rest of the smaller publicly traded U.S. stocks another $2 trillion, according to analyst Howard Silverblatt and our own Robert Hum. Oh, and let's not forget crypto! A year ago, the asset class (if you want to call it that) was worth more than $3 trillion. Today, it's just over $806 billion. So between the stock market and crypto, we've lost more than $12 trillion of wealth in about twelve months' timeWow. 

So if you're feeling poorer this year, you're not alone. The easy money days of the pandemic, when "stocks never go down" and "apes" were fueling niche stocks to new highs and everyone felt like a genius...those days are long gone. Everyone is kicking themselves for not selling at the highs. It's not just you. 

This is just what happens when the government and the central bank inject $10 trillion of stimulus to help the economy through the pandemic, and then have to basically suck it back out after realizing that it was way, way too much. It wasn't just asset prices; the entire economy swelled in size. Nominal GDP soared by 10% last year! The price of everything reset higher. How could it not have with a tidal wave like that behind it? 

Now, the script is playing in reverse. Price inflation in goods is also receding from its highs as the Fed tightens. The economy is slowing substantially. The money supply, which soared when the Fed expanded its balance sheet, has now shrunk by nearly 2% since the spring, an almost-unheard-of kind of decline. This will likely be the first annual drop in at least sixty years

The real question now for each data point—whether home prices, car prices, Apple's share price, the S&P 500—is, does it have to reset all the way back to pre-pandemic levels? For lumber, the answer is yes. If semiconductors go the same way, as I wrote about last October ("Are semis about to get lumbered?") then the SMH ETF, down almost 40% from its peak, still has another 25% to drop. 

As for Apple, it was trading around $80 pre-pandemic, versus $128 today. As for Tesla, it was around $60 pre-pandemic, versus $106 today. Ironically for Tesla, that's the same level our super-bearish trader warned us yesterday was the next real resistance level for the stock after it has had its worst month ever, down 45% and crashing through every other resistance spot on its way down. The S&P 500 more broadly, if you're wondering, is still about 500 points, or 13%, above its February 2020 levels.  

I can really only see two ways out of this horror-movie-style reversal. One, a Fed pivot that stops the liquidity drain. Or, two, a spate of better-than-expected corporate earnings next season that prove the market can stand on its own two legs without Fed support at justifiably higher levels. In the meantime, it's all making for a pretty ugly finish to what's been a very ugly year.  

See you at 1 p.m! 


Twitter: @KellyCNBC

Instagram: @realkellyevans