FAANG Stocks Witnessing Strong Downtrend: Is It A Buying Opportunity?

  • Oct 12, 2018 AEDT
  • Team Kalkine
FAANG Stocks Witnessing Strong Downtrend: Is It A Buying Opportunity?

FAANG Stocks Witnessing Strong Downtrend: Is It A Buying Opportunity?

Considering the global macro-environment, a lot is happening, and these factors are weighing on the investors’ sentiments thus, prompting them to liquidate their holdings. The US treasury secretary announced that the federal panel would now be allowed to investigate the foreign investments in the US companies which could make available the nonpublic technical information as well as a place in the decision-making and the company’s board. Thus, it would not be wrong to say that the Trump administration is restricting China to gain access to the emerging technologies.

The week ending October 12, 2018 was not really a good week for the biggest technology stocks in the United States. To be precise, the FAANG stocks (i.e., Facebook, Amazon, Apple, Netflix, and Alphabet) witnessed the strong downward momentum in this week. The FAANG stocks have been used to cap the losses which were being witnessed because of the global market meltdown. The market participants continue to short these giant technology stocks. The robust increase in the interest rates are impacting the stock markets globally but the downtrend in the tech stocks was the main point of concern. The primary reason for the sell-off in the tech stocks was that the market participants were of the view that the increased valuations of the tech giants would not be justified amidst the increased interest rates environment. However, some of the market participants might also be unloading the big tech stocks just to book the profits. 

However, the strong downturn in the tech stocks could also be regarded as the buying opportunity for the market players primarily because whenever the market rebounds it is expected that the FAANG stocks would be witnessing a robust upward momentum. Therefore, it is anticipated that when the markets turn to the bull territory, the portfolio managers would be reducing their short exposure in the FAANG stocks. Therefore, the buying momentum in the tech stocks would boost the stock prices of these stocks.

The higher interest rates continue to impact the markets. The Federal Reserve’s view that the US economy is in a strong position has made the market participants aware that the rate hike process is expected to be continued. However, US President completely opposes the decision of the Fed to increase the interest rates as this could restrict the growth in the economy. Needless to say, the strong momentum, as well as strengthened fundamentals, has been achieved primarily because of the President’s economic policies.

However, a positive news is also coming to the table. The US President and Chinese leader are expected to meet each other in November 2018 in G-20 summit. This meeting could be considered a meet in which the rising trade tensions between the two might be discussed and expectations are that they might get resolved. It is in the interests of the global economy that these the disputes between these two economies end as the escalating tensions could hamper the global growth and the business environment. An IMF report also views that the rising tensions have the potential dent the global economy.

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