Year to Date Performance of FAANG vs. the S&P 500
- Market corrections are often the result of unrealistic valuations in a number of large stocks or a specific market sector.
- The latest correction is largely the result of high valuations in the technology sector, most notably FAANG (Facebook, Apple, Amazon, Netflix and Google).
- While the S&P 500 as a whole was down 10% during the recent correction, the Information Technology sector within the index, fell over 12%. These FAANG names played a major role in the recent decline.
- Because of the relatively large size of the FAANG stocks (13% of S&P 500 market weight), their selloff had a major effect on the performance of the entire stock market.
- It is important to recognize that the correction was not the result of a negative economic outlook, but rather a healthy reaction to the overvaluation of a select few names.
Technology Sector has had a major impact on Year to Date S&P 500 Performance
At Aventine Financial we monitor a number of market indicators, both fundamental and technical, to evaluate whether a significant decline is more likely than not in the near term. Our indicators currently do not show that a bear market or recession is likely in the next 6-12 months.
It is important to work with a financial advisor to help you avoid overvalued investments, eliminate emotions, and leverage prudent investment decisions. Stock market corrections can be a net positive for both the short-term and long-term growth of your portfolio.
Schedule a meeting today and see how we can help.
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Until next time, all the best!
Chris
By: Christopher Wills, CPA, CFA, CFP
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