The last couple of weeks have been very difficult for momentum investments like the Tech and communication sectors as several stocks declined heavily.
The five FAANG stocks (Facebook, Apple, Amazon, Netflix and Google-parent, Alphabet) have collectively lost more than $1 trillion in market value since their recent highs. This is like imagining that Apple (which at one point this year was valued $1 trillion) lost all its value!
Since July 25, Facebook lost $250B (a decrease of 40% in price)
Since Sept 4, Amazon lost $255B (a decrease of 29% in price)
Since Oct 3, Apple lost $222B (a decrease of 24% in price)
Since July 27, Alphabet lost $155B (a decrease of 22% in price)
Since June 21, Netflix lost $63B (a decrease of 39% in price)
The five tech growth stocks, which were the favourite investments for the past decade, each closed in a bear market on Monday. A bear market is a fall of 20 percent or more from a stock's 52-week high.
Just on Tuesday, Goldman Sachs slashed its Apple price target due to weakness in demand for Apple’s products in emerging markets. Facebook has been facing a lot of negative publicity following various scandals including the influence on the 2016 U.S. election and the fall out from the Cambridge analytical scandal.
Amazon shares started to decline when the company gave a lower than expected Q4outlook during their third quarter results. Both Netflix and Alphabet, largely dropped in lockstep with the rest of the FAANG stocks.
Will this drop continue for the rest of the year?
I think that there is more room for prices to fall even more (We have actually provided several trading ideas on Google, Apple and Netflix which have done very well) before starting the so called Santa's rally in December.
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