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FAANG Stocks rule ... until They Don’t
This week’s yellow-highlighted section of our “Performance That Matters” table focuses on why the S&P 500 (SPY) is up 14% year to date, 10% a year the past 3 years and 7% a year since the start of 2022. All, while the same stocks weighted equally have produced returns of 1/2 to 1/3 of that over those same time frames.
The FAANG stocks (Facebook, Apple, Amazon, Nvidia, Google) stocks are the chief source of that historical anomaly, which I have only seen to this extent before the dot-com bubble burst. Then, as now, this trend appears in place…until it isn’t. Then, as the old saying goes, it will reverse gradually, then all at once.
I don’t predict the future, I adapt to the present
As I’ve written here, I see opportunities to make profits with reasonably low risk of major loss all the time. That’s a given when you are ready, willing and able to consider not only investments that go up in sync with stock and bond markets, but also exploit those times when prices fall.
We’ve seen stock prices of the FAANG gang sprint higher again during the first half of 2024, while much of the market has been stagnant or worse. Just like we saw last year. And with bonds, the rising interest rate trend was showing strong signs of reversing hard, as I pointed out here recently. That horse appears to have left the barn.
This is yet another reminder of one of the core principles of my investment discipline, one I truly hope has connected with our audience. Long-term investing is not planting seeds and hoping they grow. Once the planting is done, there is plenty of work to be done to nurture the crop through its cycle.
Now, I’m going to stop writing because I’ve already gone beyond my knowledge of farming! But hopefully the analogy lands successfully.