The U.S. stock market notched yet another record on Wednesday, and many investors are anxiously looking for signs of a slowdown.
Perhaps not coincidentally, researchers at Sanford C. Bernstein & Co. say they’ve spotted one. According to Bloomberg News, Bernstein has found that correlations among investment styles — or factors — such as value and momentum “have shot to all-time highs.”
That means they are moving in the same direction, and that is apparently a bad omen. As Joseph Mezrich, managing director at Nomura Securities International Inc., told Bloomberg, “In the past factor correlation has tended to rise in periods of macro stress.”
The concern is likely to interest more than just wary investors. Factor investing is increasingly popular. Investors have poured $352 billion into value, momentum, quality and other factor exchange-traded funds since 2013, according to Bloomberg Intelligence, nearly double the $191 billion in factor ETFs at the end of 2012.
Continue reading “Dance of Investing Styles Doesn’t Signal a Downturn”
It’s time for FAANG stocks to break up, at least in investors’ minds.
Facebook, Apple, Amazon, Netflix and Google parent Alphabet can’t get away from one another. Every time one grabs the spotlight — as Apple did last week when it became the first U.S. company with a $1 trillion market value — it brings along the other four.
They’re alternately hailed as the hot stocks, technology’s brightest lights and indispensable growth companies, and jeered as a worrisome sign of a frothy and top-heavy market. But look closely and it’s no longer clear why they should be lumped together at all.
Let’s start with the technology moniker. Amazon is a retailer and Netflix is an entertainment company, which is why, contrary to popular perception, the Global Industry Classification Standard, or GICS, tags them as consumer discretionary companies, not tech. And as of the next GICS reclassification in September, Facebook will move from the tech sector to telecommunications, where it belongs. Only two of the five FAANGs, in other words, are true technology companies.
Continue reading “FAANGs Are More Solo Acts Than a Tech Supergroup”