What Happened to the FANGs?
The Dow Jones Industrial Average tumbled into the red Thursday afternoon, squandering its morning gains as new trade war rumors circulated.
With the averages approaching their highs, it should come as little surprise that the trade war hawks are getting restless. While Trump has yet to tweet any new threats, a Reuters report released Thursday afternoon featured an account from Trump trade advisor Michael Pillsbury, who noted that the president is ready to ratchet up tariffs if a deal with China is not reached soon.
As we’ve noted many times before, Trump gets more brazen with his trade war demands as U.S. stocks rise. I’m certain the administration — mainly Kudlow and Mnuchin — are focused on the Dow’s every move. The stock market is their scorecard and Trump knows his reelection chances drop if stocks fall into a bear market.
But for now, the market is enjoying calmer waters. Expect Trump to attempt to tighten the screws on China if we see new all-time highs within the next couple of weeks.
Next up: Let’s dig a little deeper into how the latest rate cut could affect your portfolio.
“Gold could be the biggest beneficiary of recent Fed and White House policy decisions,” our own Mike Burnick says. “We’ve already seen gold rise considerably through the first half of 2019, and after a brief pullback coupled with signals the global economy is grinding to a halt, gold should double down on its earlier run and soar again through the rest of the year.”
Moving some money into gold right now is a great way to beat the rate cut blues, Mike notes. After all, gold has posted an impressive rally so far this year, briefly topping $1,550 earlier this month before retreating to consolidate just above $1,500.
Of course, Mike’s also aware that gold isn’t exactly cheap right now.
“Savers with only a few thousand tucked away may not feel comfortable dumping $1,500 or more on 1 ounce of bullion,” he continues. “For those savers, we suggest considering moving your money to an online bank like Marcus by Goldman Sachs or Ally’s online banking service.
These online banks have weathered the rate cut storm much better this year and many still offer favorable rates over 2%, compared to brick and mortar banks’ piddly returns.”
“You don’t have to let the Fed’s rate cut and Trump’s war on American savers hurt you,” Mike concludes. “A few simple moves could save you a lot of pain as rates drop once again.”
Finally, it’s time to check up on the once-mighty FANGs.
It’s no secret that the FANGs — Facebook, Amazon, Netflix, and Google (Alphabet) — were one of the main forces powering the bull market in recent years.
But many of these stocks have since fallen on hard times. Luckily, hindsight allows us a glimpse into what might have caused their downfall.
Remember the NYSE FANG+ Index futures that launched in late 2017?
It trimmed the fat and gives speculators the most-hyped tech names to trade in one futures package. The index was initially comprised of the four original FANGs plus Alibaba, Baidu, Nvidia, Tesla and Twitter. The FANG+ Index futures packed the market’s hottest stocks into one trading vehicle.
Of course, the party didn’t last. While the FANG+ launch didn’t perfectly mark the top of the FANG phenomenon, it clearly showed this trade was getting a bit long in the tooth.
Many of these hot momentum stocks started to go their separate ways last year.
Here’s where they stand this morning:
Facebook Inc. (NASDAQ:FB) remains below its all-time highs set in July 2018. Amazon.com (NASDAQ:AMZN) hasn’t been able to hold $2,000 following several attempts. Netflix (NASDAQ: NFLX) remains more than 20% off its July highs. And Alphabet Inc. (NASDAQ:GOOGL) failed to maintain its first-quarter momentum that briefly launched the stock to new highs.
But just because the FANG meme isn’t tracking to new highs doesn’t mean the mega-cap tech trade is dead. Just look at Microsoft Corp. (NASDAQ:MSFT).
Not only is Microsoft the stock market’s most valuable player — it’s also teasing a fresh breakout to new all-time highs. The stock is up more than 40% year-to-date and appears ready to embark on the next leg of its journey.