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Okay, let’s try this again. A quick thread on the impact of high-flying tech stocks on the performance of the S&P 500 during this pandemic.
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The FAMANG& #39;s - $FB, $AAPL, $MSFT, $AMZN, $NFLX, and $GOOG - have, in aggregate, been down only 1.8% since COVID-19 started affecting equity markets.
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As of last night’s close, the FAMANG’s had a market cap of $5.5 trillion.
Before this pandemic kicked off, they had a market cap of $5.6 trillion.
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Before this pandemic kicked off, they had a market cap of $5.6 trillion.
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During this period (Feb 24-May 4), the S&P 500 was down 14.5%.
Without the FAMANGs, it would have been down 17.2%.
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Without the FAMANGs, it would have been down 17.2%.
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For just six stocks out of 500, that is a very big impact.
But the bigger story is what has happened to “low-beta” stocks, and the exit of “high-beta” names on the other side. The 50 S&P 500 index constituents with the lowest betas coming into the crisis are actually up…
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But the bigger story is what has happened to “low-beta” stocks, and the exit of “high-beta” names on the other side. The 50 S&P 500 index constituents with the lowest betas coming into the crisis are actually up…
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…and the 50 SPX securities with the highest betas coming in to Feb. 24 are down over 46%.
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And there are similarly stark differences in terms of flows out of value and into growth, and out of low momentum into high momentum names.
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So, during this period of tremendous uncertainty, people (and perhaps machines) are trying to figure out where to allocate their money, and are opting for the obvious secular winners, and the names with optically appealing features.
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Importantly, this all kinda makes sense. The directional moves make sense.
But the more interesting ?? is whether or not the magnitude of these relative moves make sense.
Maybe they do? Or maybe they don’t.
We shouldn& #39;t not ask the question, because they are wild.
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But the more interesting ?? is whether or not the magnitude of these relative moves make sense.
Maybe they do? Or maybe they don’t.
We shouldn& #39;t not ask the question, because they are wild.
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(A special thanks to @ThadMcMonster, @JSim1020 and @DotardsUnite for spotting an error in an earlier version of this)
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