Sep 19

Here’s the math on how the new iPhone could boost GDP

By MultiplyWealth's Team

The just-released Apple (AAPL) iPhone has the power to boost the overall U.S. economy, according to JP Morgan analysts.

The anticipated phone features an A6 processor that is twice as fast as the previous one. It’s also the company’s thinnest and lightest phone to-date.

In a note to clients, chief economist Michael Feroli said the iPhone 5 could add between 0.25 and 0.50 points of annualized GDP growth in the fourth quarter.

It sounds a bit far-fetched, but it’s really not. Here’s how that breaks down:

  • Feroli assumes Apple will sell 8 million iPHone 5s in Q4.
  • Based on past launches, he sees a sales price of about $600 (pricing hasn’t been announced).
  • There's about $200 of import content assumed for each phone
  • That means an estimated $400 per phone would contribute to GDP
  • The total is $3.2 billion, or $12.8 billion annualized.
  • That assumption is an extra 0.33% of GDP (it's not science here, so he gives it a 0.25 to 0.50% range).

I find it amazing that a single product launch has the ability to move the needle for the entire U.S. economy.

What I find even more amazing -- as well as concerning -- is Apple's influence on the U.S. stock market.

Apple now accounts for 4.79% of the S&P 500. That is as nearly as much as the market caps of the three next-largest tech companies: IBM (IBM), Microsoft (MSFT) and Google (GOOG).

Apple also accounts for about 24% of the combined tech sector market weighting within the S&P 500.

So Apple's influence on the markets is a positive... until the day comes when there's a big Apple stock hiccup.

 

If you want to talk about how potential market events or the fiscal cliff might affect your equity portfolio, and perhaps talk about whether some of our defensive-minded investment strategies might be right for you, write Multiplywealth at notice@multiplywealth.org It’s your own account; you can see the balance change on a daily basis, make investment changes extremely quickly, and add to or pull your money at your complete discretion.

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