Outlook for FAANG

Information is not investment advice

What is FAANG?

Let’s discuss the future of the well-known stocks: Amazon, Apple, Facebook, Google, and Microsoft, that form FAANG group. Investors call it differently: Tech Giants, Big Five, or S&P 5. These five companies are the largest and most powerful ones in the technology industry of the United States.

The end of Covid-19 is bad for Tech Giants

All these companies benefited from the social distancing restrictions and stay-at-home regime amid the Covid-19. Will they keep rallying up amid the global recovery? Probably not. A strong economic rebound isn't looking so welcome for Big Five. The time comes for the companies which were hit hard by the pandemic.

Main headwinds: inflation fears and higher yields

The $1.9 trillion stimulus package raised expectations for near-term inflation as it would boost spending. As a result, investors started questioning when the Federal Reserve would slow its asset purchases and increase interest rates.

The bond market was the first to react. The 10-year Treasury yield surged above 1.6%, the high unseen for over a year! Higher returns from Treasuries tend to impact negatively Tech Giants. That led to a so-called "reopening trade": reopening stocks that dropped at the beginning of the coronavirus quickly changed into investors’ favorites. We can already observe the rotation from FAANG to value and cyclical stocks.

Must-haves of 2021:

1. Cyclical stocks

The term ‘cyclical’ refers to a stock in which business generally follows the economic cycle of growth and recession. In other words, cyclical stocks are rising in times of economic expansion but falling during recessions and market instability. Examples of cyclical stocks are below.

The travel and hospitality industries: Booking, TripAdvisor, Royal Caribbean.

Automakers: Ford, General Motors.

Banks: JPMorgan, Goldman Sachs, and Bank of America.

2. Value stocks

Value stocks represent companies that are undervalued: they were traded at a lower price relative to their economic indicators, such as dividends, earnings, or sales. Let’s go through the most popular values stocks these days.

AT&T: a telecom giant, which is trading at less than 9.5 times this year's expected earnings.

Berkshire Hathaway: its CEO is Warren Buffett! A conglomerate of more than 60 businesses and a massive stock portfolio.

Procter & Gamble: a consumer products manufacturer. A mother of well-known brands like Gillette, Tide, and Bounty.

Johnson & Johnson: a healthcare giant, which is famous for its consumer healthcare products. By the way, it has created an effective vaccine to fight the Covid-19 virus.

Conclusion

The current pressure on FAANG shouldn’t lead the group to record lows. The falling would last just in the short term. Morgan Stanley said: "the bull market continues to be under the hood, with value and cyclicals leading the way. Growth [FAANG] stocks can rejoin the party once the valuation correction and repositioning is finished."

The good news for FBS traders is that they can make both buy and sell trades. So a trader doesn’t need to hold already an asset to sell it. Thus, traders have a chance to profit in case of either outcome.

Don't know how to trade stocks? Here are some simple steps.

First of all, be sure you’ve downloaded FBS Trader app or Metatrader 5. FBS allows you to trade stocks only through this software.
Open an account in FBS Trader (the MT5 account in your personal area).

FBS Analyst Team

More by this author

Similar

17.11.2022 17:56 G20: what did the leaders decide?

The G20 summit took place in Bali, Indonesia, on November 2022…

09.09.2022 18:15 The End of Era: What Might the UK Face Next?

The deafening news shocked the whole world yesterday: the British Queen Elizabeth II died peacefully at the age of 96…

10.06.2022 15:53 Why didn't oil prices calm despite OPEC+ attempts?

After months of pressure from the White House, Saudi Arabia relented and agreed with other OPEC+ members to increase production.

wti - west texas intermediate oil brent

Hold onto your hats, folks! The Japanese yen took a nosedive after the Bank of Japan (BOJ) left its ultra-loose policy settings unchanged, including its closely watched yield curve control (YCC) policy. But wait, there's more! The BOJ also removed its forward guidance, which had previously pledged to keep interest rates at current or lower levels. So, what's the scoop? Market expectations had been subdued going into the meeting, but some were still hoping for tweaks to the forward guidance to prepare for an eventual exit from the bank's massive stimulus

fundamental analysis market forecast jpy - japanese yen technical analysis usd forex signals aud - australian dollar

Choose your payment system

Phone number

Select the best time for us to call you.

Select the best time for us to call you. We give calls from Monday to Friday in suggested intervals. In case we couldn't get through, we will try again at the same time the next day. For getting real-time assistance, use FBS chat.