FANG and the deeper dive

Sep 02, 2020 | Jeremy Goldfarb


From the investment desk


There has been quite a bit of talk regarding the rise of the stock market and its departure from economic reality. As I have cited in previous posts however, not everything is what it seems.


In one of the best charts I have seen to date, Bob Dickey (RBC Technical Analyst) captures some stark market realities (is it too early for market jokes?)


What you see above is the sharp departure of the "FANG" index from the remainder of the stock market. The SP500 has held up in 2020 overall, but that is largely due to the weight that FANG brings to that particular index. Take a deeper dive and you will note the DOW is still hovering the flatline. Despite cheap credit, and remarkably low fixed income future return potential, Utilities (an income driving darling) are still down quite a bit on the year. 


What does this tell us? It could be a number of things, but here are two ideas......

1- the FANG businesses are much better positioned for the future than others and deserve the massive multiple

2- Investors are chasing rainbows because there are so few alternatives with any remote opportunity for success under the current circumstances.