FAANG to continue to face headwinds in 2019
For years, the so-called FAANG stocks have driven Wall Street higher, fuelled by surging revenue, an environment that prized growth over all else, and investor sentiment that viewed the megacap technology and internet companies as ones that could do no wrong.
That narrative showed signs of cracking in 2018. In 2019, it could collapse.
The FAANGs—an acronym that refers to Facebook, Apple, Amazon, Netflix, and Google-parent Alphabet— were volatile throughout 2018, with pronounced gains in the first half of the year dramatically reversing in the second half. While Netflix and Amazon remain up about 40% on the year, all five have tumbled from record levels, with declines ranging from Alphabet’s 17% slump to Netflix’s 37% collapse.
Facebook is the group’s worst performer in 2018, having dropped 19% year-to-date and by more than a third from its July record. Apple shares are off nearly 30% from a historic valuation above $1 trillion, a decline that cost its status as the largest stock on the market.
Investors say the downturn probably isn’t over as the companies face their riskiest environment in years with slowing growth, rising macroeconomic uncertainties, particularly with respect to trade policy, and tighter monetary policy. “The conditions that have allowed these kinds of highgrowth stocks to outperform have changed, if not reversed,” said David Lafferty, who helps oversee almost $1 trillion in assets as chief market strategist at Natixis Advisors. “The Fed’s tightening is getting to where it’s starting to hurt. GDP should decelerate in 2019, which will lead to a natural decline in earnings growth. What that means for multiples and investor sentiment is up in the air, but I just don’t see much upside.”
Such macroeconomic issues have added to concerns that the group’s yearslong growth story could be coming to an end.
NEW YORK: