Remember all those stories earlier this year that the market was being powered by the performance of the large-cap technology sector and more specifically, the FAANG (originally FANG, but Apple was added after it started to rally) stocks? The “theory” was that if these stocks ever ran into trouble, look out below. Throughout this period, we took the opposite end of the argument and repeatedly highlighted that although the FAANG stocks were doing extremely well, overall breadth in the market was strong, indicating broad-based participation.
Well, this month we got the first test of the FAANG theory and how much or little it was holding up the market. Since the close on June 8th, the S&P 500 Technology sector has dropped 2.6% and the five FAANG stocks have declined over 4%.
So how much did the overall market decline in reaction to the fall in the tech sector. Heading into Thursday’s trading, the S&P 500 is down less than half a percent.
The key to the market’s resilience in the face of Tech’s weakness has been strength in sectors like Health Care (+4.2%), Financials (+3.2%), and Real Estate (+2.0%). In fact, while the S&P 500 is down half a percent from its bull market high, it is actually up 0.3% since the Technology sector peaked.