Markets stocks

In FOMO Versus FOVA World, Nomura’s McElligott Says It’s ‘Long The Stuff That Can Grow’

We've been here before.

"Long the stuff that can grow without a hot cycle versus short economically sensitive names", Nomura's Charlie McElligott writes, in a Tuesday note, describing the current market zeitgeist. Colloquially speaking, investors are torn between FOMO ("fear of missing out") and FOVA/FODU ("fear of viral apocalypse"/"fear of depression undertow"). Perhaps the simplest way to illustrate the situation is by reference to big-cap tech versus everything else. The former is gunning for new record highs - "come hell or high pandemic", apparently. It's easy to simply call tech a bubble - again. It was certainly in bubble territory earlier this year, when the 14-week RSI (among other measures) hit levels not seen in decades, and now here we are back in positive territory for the year in the presence of a pandemic and despite the worst economic slump since the Great Depression. QQQ - the Nasdaq 100 ETF - closed with a market cap in excess of $100 billion for the first time ever last week. You're reminded that just five stocks (MSFT, AAPL, AMZN, GOOGL, FB) now account for over 20% of market cap, a figure that exceeds the tech bubble peak. Apparently, the five horseman of the new tech bubbl
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9 comments on “In FOMO Versus FOVA World, Nomura’s McElligott Says It’s ‘Long The Stuff That Can Grow’

  1. From a fundamental perspective AAPL has been leading the push up over the last few days. Who is going to buy a $2,000 smart phone after being laid off? Regarding NFLX, how many people will find it more rewarding to drop off this service once the pandemic is over and they can become social again. Can go down the list but forever, guaranteed up thesis that seems to pervade the current ‘long’ view is ripe for deflation in multiple time frames and in multiple ways.

    • AAPL in particular will soon be testing all-time highs without providing forward guidance. Bulls would say “don’t let fundamentals get in the way of a good story”. I say go right ahead but let’s talk when it is back down to $220 after 33 million people (and counting) look for a cheaper smartphone alternative…if they decide to upgrade at all!

    • Apple would seem the weakest link –services are marginal, virtually no corporate footprint. It is a hardware and consumer business. One wonders if the iPhone won’t suffer the same fate as the Mac in the mid-90s

    • @D Price, people won’t drop NETFLIX, its an utility. A must have. I have it. I barely watch a few hours of programming a week but I have been paying for it for many years now.

  2. Hi,

    It is now even more confusing. What are the returns after the 97th percentile delta long positions in the past? Does Charlie throw light on that?

    • same here, i would love some additional color on what this means: The ‘net delta’ position in Nasdaq [is] extremely long at +$11.5 billion, which is a 97th %ile rank since 2014”, Charlie says.

  3. In an earnings scarce environment, companies that can show some top line and/or bottom line growth will be favored over companies that are cyclically challenged. At some point down the road, when both the real economy and market have put in a bottom and cyclicals can show an earnings tailwind, value will shine. In my view we are not there yet- and for value players the wait can be painful. You can also see credit as a factor in the lagged performance over the last few years in small to mid US stocks, international developed market stocks, and emerging markets. When things turn it will all change, but for now “growth” and low volatility will continue to outperform.

  4. Techl/ Q’s/ FDN have been basically a one way bill highway for a month…don’t let the door hit y’all on the way out

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