Since the COVID-bear retreated in March 2020 through the end of 2021, all we heard was how stock market gains were driven by just a handful of stocks – the FAANG stocks (and Microsoft). But since the beginning of 2022, investors are now wondering whether the FAANG stocks and Microsoft have lost their teeth.
If you don’t know, the term FAANG is an acronym for five technology names – Facebook (Meta), Apple, Amazon, Netflix and Google (Alphabet). Let’s examine the performance and the change in market cap for each of the FAANG stocks and Microsoft so far in 2022. Let’s call this new group the MAANAM stocks (nowhere near as cool-sounding as FAANG).
The Performance of the MAANAM Stocks
In terms of performance, so far this year through the end of April:
• Facebook is down over 35%;
• Amazon is down over 25%;
• Apple is down over 10%;
• Netflix is down over 68%;
• Google is down over 18%; and
• Microsoft is down over 15%.
Many of those returns are worse than NASDAQ’s almost 20% decline so far this year through the end of April. But all of them are worse than the mega-cap, blue-chip DJIA’s loss of less than 10%.
Lost Market Cap in Billions
In terms of market caps, the FAANG + Microsoft stocks have lost a staggering $2.2 trillion so far in 2022. And that includes a whopping $1.4 trillion loss in the month of April alone.
For perspective, that $2.2 trillion loss is bigger than the entire economy of Mexico, bigger than the economy of Italy, bigger than Spain’s, bigger than Canada’s, bigger than Australia’s – and 50% bigger than Russia’s annual GDP.
Sizes Within the Overall Market
Here are a few other things to note:
The technology sector makes up about 23% of the market weight of the S&P 500 (by way of comparison, technology comprised about 34% of the S&P 500 during the tech bubble in March 2000).
The FAANG names make up over 21% of the S&P 500. But when you add Microsoft to that group, it jumps to over 27%.
• Facebook is 1.3% of the market;
• Amazon is 3.7% of the market;
• Apple is 7.1% of the market;
• Netflix is 0.25% of the market;
• Google is 4.2% of the market; and
• Microsoft is 6.0.% of the market.
So while some might be worried that losses (and gains) are driven by so few names, there is something investors need to remember: that’s usually how it works with market-cap weighted indices – very few names usually account for the majority of the gains.
A Perspective to Consider
From the viewpoint of a seasoned financial advisor, my perspective is actually pretty straightforward: if you only own the just the FAANG or MAANAM stocks – or even a few stocks – you are simply not diversified. Period.
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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.
Securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/SIPC.
GENESIS Wealth Management LLC is not a registered Broker/Dealer and is not affiliated with LPL Financial.
Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
This article was prepared by Financial Media Exchange, LLC. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.