Top 3 DJIA component returns in 2023

When central banks raise interest rates, bond prices fall because yields rise. As such, bonds become an attractive investment, while investing in the stock market bears more risk.

That is especially true when the tightening cycle is long like it is now in the United States.

The Federal Reserve of the United States (Fed) has raised the rates from the lowest boundary (i.e., close to zero) to above 5%. Moreover, it plans to raise them more as soon as tomorrow.

According to traditional financial wisdom, stocks should suffer.

However, the S&P 500 index is 2% higher than in April 2022. Numerous hikes later did not impress stock market investors as funds kept pouring into the stock market. 

At the same time, the Fed’s balance sheet keeps shrinking. This is the opposite of quantitative easing when stocks rose on the Fed buying government bonds.

Quantitative tightening should have the opposite effect – tightening the monetary policy should hurt stocks.

Yet, stocks trade near highs, as seen by most indices. For instance, the Dow peaked close to 37k points and now trades at 35.4k points.

Here are 3 DJIA components that outperformed YTD:

• Salesforce
• Apple
• Microsoft

Salesforce

Salesforce (NYSE:CRM) tops the list with a YTD return of +67.43%.

Salesforce does not pay a dividend and has a YoY revenue growth bigger by 31% than the sector median. It is based in San Francisco and employs 80k people. Salesforce’s stock price is up over 5,000% since its IPO.

Apple

Apple (NASDAQ:AAPL) needs no introduction, as it is one of the biggest brands in the world. The stock outperformed in 2023 despite the Fed tightening its monetary policy. It gained +54.11% YTD.

On top of that, Apple pays a dividend. The forward dividend yield is 0.5%, and the 5-year growth rate is 7.26%. Apple increased its dividend each year in the past nine years.

Microsoft

Microsoft (NASDAQ:MSFT) is in third place with a +44.05% YTD return. Just like Apple, it pays a dividend – the dividend yield is 0.79%, and the 5-year growth rate is 10.2%.

Microsoft increased its dividend for the last 18 consecutive years.

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