Last Friday and Monday’s sell-off in the FAANGs (Facebook, Amazon, Apple, Netflix, and Google—or Alphabet) may have been the end of the recent mania for those high flyers, but I don’t believe it was the end of the bull market.
Late Friday afternoon, the Dow Jones Industrial Average and the Standard & Poor’s 500 index were within a whisker of their all-time highs, and the Nasdaq Composite index, which bore the brunt of the FAANG selling, was still only about 3% off its record peak.
The FAANGs, however, have remained subdued, except for Amazon which announced Friday morning it was buying Whole Foods Markets for $13.7 billion.
Instead of a major correction or bear market, I think we’re likely seeing rotation away from the super-momentum FAANGs and back towards the cyclicals, which led the so-called Trump rally.
Financial ETFs, for instance, have seen a big inflow of investor cash as some of the big Wall Street firms take profits on their holdings of the FAANGs and redeploy them to the sectors that set the pace between Election Day and early March.
Will it work?