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FANG Markets momentum nasdaq stocks tech

Who’s In The Mood For A Good, Old-Fashioned Momentum, Tech Rout?

More cowbell.

More cowbell.

The rather precipitous drop in U.S. equities on Wednesday morning marks a continuation of a trend flagged by Nomura’s Charlie McElligott last week.

Specifically, he noted that the growth shock-led steepening episode seemed to catalyze a ”
“Momentum factor unwind, correspond[ing] with the reversal in the Growth / Value ratio.”

We touched briefly on that again Monday in the course of documenting a spate of negative news for Google.

Fast forward to Wednesday and, amid the dreaded sign “flip” in the equity-rates correlation, you should probably keep yourself apprised of the extent to which the stock selloff continues to exhibit that same unwind in Momentum/Tech/Growth.

The Momentum ETF is having a truly horrible time after narrowly avoiding a third consecutive >1% down day on Monday.

MTUM

Meanwhile, Growth continues to underperform Value. This is the seventh session out of eight that the Growth ETF has lagged.

realtive

As you might expect, FANG+ is having a truly rough go of it, falling the most since March:

FANG

(Bloomberg)

The losses there are starting to really pile up:

FANG2

(Bloomberg)

And finally, note that this is the “wrong” kind of rate rise, as reals and the term premium trade lead bond selloff:

rates

(Bloomberg)

[Side note: The teaser image for this post is an Old Fashioned – I feel like some of my avocado toast/ vodka cranberry Millennial readers might not be familiar]

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2 comments on “Who’s In The Mood For A Good, Old-Fashioned Momentum, Tech Rout?

  1. H, didn’t you mention in one of your posts that something like 85% of SP500 companies are currently in blackout period as a result of earnings coming up? I guess this is what it looks like when there are no buy backs to jump…

  2. Brian K,
    Always makes me laugh when retail investors believe there is a blackout period for companies:
    Read Rule 10b-18
    https://www.investopedia.com/terms/r/rule10b18.asp

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