The past decade has been truly exceptional for the stock markets, with almost all assets recording huge profits. But if we have to define the period, it will be “the decade of the Fangs”.
The list in the group varies. The original Fang Club is made up of Facebook, Amazon, Netflix and Google, but many also add Apple to make it Faang, as well as Salesforce to become Faangs. Some analysts have even introduced Microsoft (Famangs?) To the group, while the New York Stock Exchange’s Fang + index also includes Tesla and Twitter, along with Alibaba and Baidu from China.
Today, the group is synonymous with large, fast-growing US tech companies that simply dominated the markets in 2010. The question is: will the new decade be strong again for Fang, or will other parts of the stock market dominate their place.
It is difficult to make an accurate forecast. But most analysts and experts expect technology companies to continue to rise – even if the leadership between them changes.
“Technology will continue to dominate,” said Peter Oppenheimer, Chief Global Equity Strategist at Goldman Sachs and former Apple CFO. “There has been incredible growth in some companies that have turned into mega – market capitalization. There is a chance that there are companies that have not yet gained popularity – to become the next big hit of the decade.
And while almost every sector enjoys good profits, it is difficult to ignore the importance of technology companies in recovering from the crisis. Facebook, Amazon, Apple, Alphabet and Microsoft added $ 4.3 trillion to the stock market in market cap. This is the value of the whole market in the UK and almost all of it in China.
Technology already accounts for over 25% of the value of US markets, making it the largest sector. And as dominance fades from energy companies from the early 20th century – or rail companies in the second half of the 19th century – their position seems difficult to shift.
With the exception of a brief period in the mid-2000s, when financial companies were at their peak, technology companies were the largest in the United States since 1990. Mr. Oppenheimer sees little chance of change. “Historically, the stock market reflects the main drivers of the economy and things don’t change that easily,” he says.
However, the increase has made many of Fang’s companies – as well as many close to this group – look expensive. This makes the new decade more difficult to forecast in terms of returns.
Technology companies may continue to expand their businesses, but that does not mean that their shares will continue to crush everyone else the same way. For example, Microsoft peaked at $ 59 in December 1999, but it took 16 years to hit that level again after the dotcom bubble – even when the Redmond, Washington-based company nearly doubled its profits over that period.
Additionally, “Big Tech” faces many potential problems, including tight regulation, de-globalization, and consumer backlash, notes Andrew Milligan, head of global strategy at Aberdeen Standard Investments.
Mark Haefele, chief investment officer at UBS Wealth Management, thinks investors should target the emerging, emerging sectors, such as “focused on sustainable investing, digital transformation, genetic therapies and more.”
Mr Oppenheimer also thinks that companies that have taken up the battle against climate change will perform exceptionally well in the coming years.
“Many countries are committed to reducing their carbon footprint, and this requires major investment in new technologies,” he said. “This will create great growth in companies we have not heard of, but it will also change many of the well-known companies, especially the big energy ones.”
And while this is pushing investors to dump companies that extract hydrocarbons from the earth – along with old tobacco campaigns – it can change the energy sector at its core. “It would be good to ignore the oil companies, but given the scale of the investment needed, they will probably need to be part of the solution,” he says.
An old favorite may also emerge before the eyes of big investors. Kristina Hooper, chief global strategist at Invesco, says emerging markets will look “very attractive” in the new decade, seeing how far they have lagged behind developed ones for much of the post-crisis period, although they have enjoyed much more good economic prospects.
“Technology will continue to dominate, but the new decade will be the decade of emerging markets,” she says. “You have a mature middle class that has far better accounting records and much better demographics.”
However, after 10 years, sectoral definitions, which are always arbitrary, may fall apart completely. Even the idea of a “technology company” can be anachronistic.
“Until then, we will say that technology is so widespread across all sectors that we will just wonder what the technology sector really is,” says Mr. Milligan.
Source: Financial Times
Original Post: Wall Street strategists look to unearth the next ‘Fangs’
Trader Aleksandar Kumanov