While stock indexes have mostly suffered across the board for 2022, the biggest upsets were witnessed in the information technology space, a sector that performed admirably during the Covid lockdown period. With the Federal Reserve (Fed) increasing rates, supply chains stretched, the war in Ukraine, and, more recently, new Covid lockdowns in China, FANG stocks continued to perform poorly compared to the previous years. Welt’s Holger Zschaepitz added Microsoft (NASDAQ: MSFT), Apple (NASDAQ: AAPL), and Nvidia (NASDAQ: NVDA) to the FANG stocks and coined a new acronym FANGMAN; he continued to show their performance in the past five years indicating a deflation of the prices. In particular, he noted FANG had lost $2.4 trillion in market cap from 2021 all-time high as Netflix and Meta have lost most of their gains from the past five years.
Underperformance heavily punished
In this ‘new’ market surrounding, high-flying stocks that show weakness in their performance are heavily punished. The latest example is Netflix which reported an earnings report which underperformed expectations, and the stock nosedived by over 30% in one day. Shrewd investors were already warning of a possible rotation in the market in February of this year. Christopher Wood, global equity strategist at Jeffries, was one of the more notable ones that pointed to this possible rotation. “Overall, the current situation can best be summarised as the inverse of Goldilocks. It also continues to look ever more at the case that the FANG stocks peaked as a percentage of the S&P 500 market cap back in the summer of 2020. In this respect, the rotation out of growth stocks will probably not be completed until the leaders of the bull markets succumb in a more decisive fashion,” Wood stated. Rising yield and global inflation could spell further trouble for the tech sectors, especially if earnings show any signs of weakness. Thus, market participants who are not in FANG or other tech names would be well served to sit on the sidelines for a bit longer until the earnings of other tech companies come in to better gauge where the market could be heading. Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
