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- Shares of FAANG underperformed the S&P 500 and Information Technology Sector, high valuation could be a setback.
- Regulatory challenges and the shifting consumer habit cloud FAANG’s growth outlook.
- Bitcoin’s decentralized nature could be an alternative hedge of social-centric tech companies.
Despite the fluctuations in the equities markets, major US stock indexes are still able to maintain their YTD gains so far. Sectors such as tech and real estate have been contributing most of the gains to the indexes. As regulatory issues are continuing to loom and challenge the outlook of those fast-growing sectors, could Bitcoin make a better investment in a volatile market compared to the mega-size tech companies?
Although the tech sector has been a major pillar supporting the US equities markets, 2Q19 was a terrible quarter for the tech sector, the NYSE FANG+ Index, which measures the performances of the 10 US-listed tech and media companies with the biggest market caps, such as Facebook, Apple, and Amazon. The Index has given up more than 18% of the market value in May before rebounding in June and July. However, the FANG+ Index is still underperforming the broader S&P 500 and the S&P Information Technology sector. FANG+ has gained about 11% year to date, while the S&P 500 has been up more than 14% in the same period. Meanwhile, the S&P Information Technology Sector Index rose 25%.
Figure 1: FANG+ Underperforms
So, after the sell-off in May and early August, are tech giants still overvalued? Before answering that question, it’s key to understand the growth outlook of those companies.