The shares of Amazon, Netflix and other companies known as Faangs have rallied to fresh highs as the focus of investors has shifted from concerns about internet privacy and heightened regulation in the tech sector to worries about trade tariffs.
Transatlantic trade tensions escalated on Friday as the EU vowed to respond to US President Donald Trump’s new tariffs on imports of steel and aluminium with measures of its own, while leaders from Canada and Mexico also prepared retaliatory duties.
“The trade war discussion is resulting in folks hiding in Faang stocks,” said Michael Arone, chief investment strategist at State Street Global Advisors.
The NYSE Fang+ index rose 2.5 per cent to a new high on Friday, taking the year-to-date gain to 26 per cent. The group originally given the moniker included Facebook, Amazon, Netflix and Alphabet, formerly known as Google, but has since expanded to include Apple. The index also includes other high-profile tech companies such as Twitter, Nvidia and Chinese ecommerce giant Alibaba.
Amazon, Netflix, Facebook and Apple closed at record highs on Friday.
The outsized performance stands in contrast to the S&P 500, which is up little more than 2 per cent in 2018 and failed to test its January high. The tech-heavy Nasdaq Composite has added 9.4 per cent this year and sits about 1 per cent below its March high.
“The feeling is let’s go with what is working and what has been working is Faangs,” Mr Arone added. “We are uncertain as to what the future holds as it relates to tariffs and investors cannot determine the impact on industrials and other sectors like steel and aluminium because of all the back and forth.”
JJ Kinahan, chief market strategist at TD Ameritrade, agreed. “Certain sectors are more susceptible than others [to trade tension] and you go to the ones that are less susceptible,” he said. “Tech seems to be less susceptible — right now.”
Investors are again embracing tech stocks after a sharp sell-off in March when privacy concerns translated into fears that regulators would step up oversight of these groups or even that they had become powerful enough to be broken up.
Facebook and other shares came under pressure after reports that Cambridge Analytica, a data analysis company employed by Mr Trump’s presidential campaign, mined the personal data of 50m Facebook users.
Also on Friday, UBS analysts raised their price target on Apple to $210 from $190.
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