Why FAANG stocks got chewed up Why FAANG stocks got chewed up Why FAANG stocks got chewed up

Why FAANG stocks got chewed up

Peter Garnry

Head of Saxo Strats

Summary:  The stock market is a sea of red right now, particularly the tech behemoths. There are several, mainly technical, reasons for this and panic would be premature.

NASDAQ 100 Index futures are down 1.7% so far today, reminding everyone that equities can indeed fall and especially that gravity also applies to the FAANG stocks.

In my Bloomberg TV interview earlier this session I talked about the valuation premium between the NASDAQ 100 and the S&P 500 is shrinking fast, in line with previous experience whenever growth expectations have come down. The obvious periods are 2015-2016, 2010-2013, 2008, 2004/05. The next destination for the NASDAQ 100 Index is likely around the 6,250 area or around 2.9% lower from here. I said on Bloomberg TV that the likely drawdown extension was somewhere around 5% from current levels.

I believe three forces are playing technology stocks down: 1) momentum funds shifting out of previous winners, 2) retail investors getting nervous about their FAANG stocks with large gains from previous years, 3) large asset managers are in general changing positions to account for a weaker entry to 2019. The last potential driver is that hedge fund concentration has been massive in technology stocks and remember these funds live to see another high watermark to get their 20% cut of profits.

Do I think this is the one in the sense that we will plunge into a dramatic bear market? No, I don’t think so. At one point value investors will come into the game in technology because of valuation. To give some perspective, Facebook is now valued at a 6% discount to the S&P 500! And Apple is valued at a 26% discount to the S&P 500 on EV/EBITDA. Facebook’s free cash flow yield is 5.1% – typically something we see at utilities or consumer staples companies. Remember many of these technology companies are quasi monopolies and regulation will not change that in the short term so there is a mean-reversion case in US technology stocks at one point.

In my Bloomberg interview I sketched out a potential path from current wobbling markets: No major breakthrough on Sino-US trade at the G20 meeting, together with another Fed rate hike in December, leads equities lower thereby weakening Trump’s manoeuverability. The Fed changes course in Q1 halting rate hikes and late Q1 investors will realise that China’s stimulus is indeed working and equities stage another leg up, led by China – European equities will be helped too by China due to deep trade connections. 

What would it take to scream SELL EVERYTHING? It would require leading indicators in negative territory, credit markets collapsing, China unable to engineer a rebound, US-China conflict worsens dramatically. And none of these scenarios are anywhere near reality at this  juncture.


The Saxo Group entities each provide execution-only service, and access to analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Inspiration Disclaimer and (v) Notices applying to Trade Inspiration, Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular, no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/en-sg/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Markets or its affiliates.

Saxo Markets
88 Market Street
CapitaSpring #31-01
Singapore 048948

Contact Saxo

Select region


Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-sg/about-us/awards.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website are not intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.