Where now for FANG stocks?
Vaccine news prompted investors to flood back to value stocks yesterday, but is the great rally in FANG stocks over as a result?
Tech suffers as value surges
Yesterday’s remarkable bounce in stock markets saw one big area left out of the party. Tech stocks suffered a poor day, with the Nasdaq 100 reversing on the day having leapt higher along with everyone else.
On many measures, high-growth names suffered their worst performance in months. FANG stocks, for so long the big winners, saw their worst day against the ‘average’ S&P 500 stock in four years, with a gap of almost 8%, while the Dow Jones enjoyed its best performance against the Nasdaq in twenty years.
The big winners from Monday’s soar away gains were those sectors that have suffered most in recent months, such as banks, travel stocks and energy names. These sectors have suffered heavily thanks to expectations of weaker demand for holidays, a drop in oil consumption and record-low interest rates. The vaccine news suggests that there will be some reversal in each of these trends, even if that reversal is some way off.
Is that it for FANG stocks?
As is the way of markets and the financial media, there was no shortage of commentators willing to declare the great ‘long FANG’ trade dead. On a short-term time frame, it does look like the big post-March rally in these stocks is at an end. But even on a five-year time frame yesterday’s weakness barely even registers.
FANG was a popular trade long before Covid-19, and with good reason. These big tech stocks have been market stars for years, thanks to their commanding market share and impressive levels of cash generation. In a world of low yields, high-growth stocks have been very much in demand.
Growth vs value
Are things about to change? Is value finally due to catch up with growth in terms of performance? Certainly, a steepening yield curve would support the idea of stronger growth in the economy and higher inflation, which may drive investors towards other sectors than technology.
But to keep things simple, most trends go on much longer than anyone expects. We might finally be at the point where the big tech rally begins to weaken, but the tech giants are still compelling investments even in a changing world. It would be silly to cut them out of a portfolio now on one day’s worth of vaccine news. It would be even more foolish to begin shorting them without clear evidence of a deterioration in fundamentals and/or their current bullish price momentum.
Learn more about how to trade stocks
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Act on share opportunities today
Go long or short on thousands of international stocks with spread bets and CFDs.
- Get full exposure for a comparatively small deposit
- Trade on spreads from just 0.1%
- Get greater order book visibility with direct market access
See opportunity on a stock?
Try a risk-free trade in your demo account, and see whether you’re on to something.
- Log in to your demo
- Take your position
- See whether your hunch pays off
See opportunity on a stock?
Don’t miss your chance – upgrade to a live account to take advantage.
- Trade a huge range of popular stocks
- Analyse and deal seamlessly on fast, intuitive charts
- See and react to breaking news in-platform
See opportunity on a stock?
Don’t miss your chance. Log in to take advantage while conditions prevail.
Live prices on most popular markets
- Equities
- Indices
- Forex
- Commodities
Prices above are subject to our website terms and agreements. Prices are indicative only. All share prices are delayed by at least 15 minutes.
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.
