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FAANG Stocks On a Tear Higher


Posted: Friday, November 6th, 2020

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As the United States still counts the votes for the Presidential election, FAANG stocks decided not to wait for the outcome anymore. The tech giant companies in the United States are on a tear higher, continuing their impressive performance in 2020.

FAANG is nothing but a nickname. More precisely, an acronym. It stands for Facebook, Apple, Amazon, Netflix, and Google (nowadays Alphabet, as the name changed in the meantime). FAANG stocks sit at the core of the tech index, the Nasdaq 100.

When the coronavirus pandemic reached the Western world, the financial markets reacted. Stocks worldwide declined, and so did some safe-haven assets (e.g., gold). Suddenly, the U.S. dollar liquidity shrank, and so it quickly became the de-facto safe-haven asset.

FAANG Stocks

However, that changed quickly. The Federal Reserve of the United States intervened and overnight established U.S. dollar swap lines with major central banks in the world. It was enough for risk assets to reverse course.

From that moment on, the risk-on sentiment in the United States dominated financial markets. When the stock market in the States is in a rising trend, the flows affect other markets as well (e.g., currencies, fixed-income).

FAANG Stocks Outperforming in 2020

Shortly after the rebound in stocks, the Nasdaq 100 made a new all-time high. Unsurprisingly, the FAANG stocks led the way up.

As the world’s economies were grounded to a halt due to the coronavirus pandemic, new trends emerged. Remote work, for instance, became a reality. Moreover, consumer behavior changed. People already started distinguishing between pre-crisis and crisis conditions.

As such, people around the world consumed more Internet services. The time spent online increased exponentially – and with it, the FAANG stocks profit.

Netflix saw its subscribers’ base growing at incredible rates. Google and Facebook advertising and monthly users increased. Amazon quickly became one of the companies that benefited the most from the lockdowns, growing at incredible rates and expanding its businesses accordingly.

Fast forward to pre-election, the so-called FAANG index was up 51% on the year. It dwarfed gold, up 25%, or the broader S&P500 index.

FAANG Index Up Some More After Election Day

This Tuesday, November 3rd, Election Day in the United States stole the attention of the financial markets. The knife-edge race, still undecided, created many unknowns for investors.

From a “blue wave” scenario to a Biden White House and a Republican Senate, investors toyed with every idea. What did the FAANG stocks do on the U.S. election jam? They rose some more.

The explanation comes from the bullish perspectives of a D.C. paralysis. Effectively, such a paralysis means no tax raise and no antitrust backlash.

To sum up, 2020 was a fabulous year for the FAANG stocks. With less than two months until the end of the year, they dominate the price action in the Nasdaq 100 index and are responsible for most of its gains.

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