Yesterday was another testing day for equity markets with the Dow closing down nearly 400 points with further unsettling losses in the tech sector. Apple was down another -4% yesterday and Facebook down a further -5.7%; this means there is at least somebody who has now lost 20% on Apple stocks in the past month, along with everyone else who has lost money buying the tech giant in the past 3 months (and still holds the stock). But Apple seems resilient compared to Facebook which is now down -40% from the highs it reached in July… the day before its stock fell -19%. But even Facebook’s recent weakness has been shadowed by NVIDIA which is down -50% from its highs of 293 earlier last month to now just 145.
The NYSE FANG+ Index which consists of Facebook, Apple/Amazon, NVIDIA/Netflix, Google as well as Alibaba/Baidu and Tesla/Twitter was down -7.2% in October. It then bounced earlier this month, but after falling another -4.3% yesterday FANG+ has fallen back below the worst levels felt in October. If later today the Index tracks weakness from the earlier Asian session it could push below troughs felt in February and April and come close to erasing all gains for the year (for the price index which started 2018 at 2,295, peaked at 3,063 and could conceivably test the 2,300 level later today).
In fact, all of the most prominent stock in the FANG+ index are now technically in a bear market, with the Index itself down -22.4% from its peak. (Nvidia -50.6%, Facebook -39.5%, Netflix -35.6%, Baidu -35.6%, Twitter -33.4%, Alibaba -29.7%, Amazon -25.4%, Apple -20.5%, Google -20.3%. Only Tesla is just -7% down from its highs in August after rallying 27% in October as most of the market suffered.)
Also, in the past 5 trading days Bitcoin has plummeted a further third of its value falling below 4,400 versus the dollar for the first time in over a year and is now less than a quarter of what it was worth in December 2017 when it topped 19,500. We know what you’re thinking, “If only I could have invested in the tech sector 11 months ago and hedged my exposure into Bitcoin”… what a wild ride that would have been. It has certainly been a difficult year so far across markets, including in credit, but the recent hit to the tech sector is not to be ignored in assessing the cycle. One of the most standout comparisons is that in the past 6 months the consumer staples sector of the S&P 500 has outperformed the FANG+ Index by over 25% (+14.7% vs -10.6%).