What The FAANG Stocks Say About The Market

The so-called FAANG stocks – Facebook Inc. (NasdaqGS: FB)Amazon.com Inc.(NasdaqGS: AMZN)Apple Inc. (NasdaqGS: AAPL)Netflix Inc. (NasdaqGS: NFLX), and Alphabet Inc. (NasdaqGS: GOOGL) – mean more to the market than most investors realize.

As long as they’re going higher as a group, the market’s going to follow their lead.

But, if they start to go in different directions from each other – or, worse if they start to slide together – the market’s headed for trouble, and possibly a sharp correction.

It seems strange that the status of only five stocks could be the determining factor of the health of the market, but here’s why the FAANG stocks are so crucial to the market’s performance and what you can do to make sure you never feel the adverse effects of it…

The “Great Gang”

There are a few good reasons why the FAANG stocks – plus Microsoft Corp. (NasdaqGS: MSFT) – attract so much attention and so much investor capital.

For starters, it’s about their revenues, their profits, their cash flows, and. in some cases, their massive cash hoards. It’s about their brands, and, in the case of the FAANG stocks, it’s about them being virtual monopolies. It’s about their subscribers, ecosystems, and products.

At the heart of it, these are growth stocks. They’re growing in every category listed above. Even Microsoft is back in growth mode.

They deserve to have a huge following regarding customers and investors. They’ve earned it. They’ve led markets higher – not quite singlehandedly, but close enough – for the last ten years.

In the process, they’ve become momentum stocks. Hedge funds, algorithmic trading programs, and even ETFs that invest in stocks with positive upside momentum (this just means they short stocks when momentum pushes them lower) chase them higher in a kind of positive feedback momentum feeding frenzy.

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