FANG Index – strong growth but more to come?

Tech stocks have stormed ahead since 2009, and with the current economic outlook and strong financial performance the gains may well continue.

Can tech stocks keep up the momentum?

Fresh all-time highs for the Nasdaq 100 confirm that there is still plenty of strength left in the rally, and with Warren Buffett announcing that he is finally investing in Amazon, the outlook seems propitious for more gains.

The Nasdaq 100 is already up 20% for the year, and new all-time highs have helped to rebut the idea that the late 2018 sell-off was about to turn into a new bear market. Yes, the rally has been going on for ten years, but the outlook seems to suggest that money will keep flowing into tech stocks.

After all, despite the volatility of the past twelve months, it seems that the post-2009 rally in stocks, which has from 2013 turned into a secular bull market, has further to go. Looking at the current economic backdrop, it is easy to understand why tech stocks remain attractive, even after an 800% gain for the Nasdaq since the 2009 low.

Interest rates around the globe remain near record lows. Despite a shift to a tightening program (now halted) by the Federal Reserve (Fed), the overall position on interest rates is still low by historic standards. Bond yields remain low (with German 10 year rates falling back into negative territory just this week), pushing investors towards equities that offer both income and capital return.

Tech stocks offer a welcome haven from economic fears

The economic outlook is difficult too. While the US economy is still doing well, the eurozone continues to stumble. Trade wars also provide another worry, especially for the economies of east Asia. Brexit of course is also a factor, and global tech stocks such as Facebook, Google and Amazon provide a welcome haven from any concerns about what kind of relationship will exist between the UK and EU should the former ever get around to leaving the latter.

Tech stocks are often criticised for being expensive, with high price to earning ratios (P/E ratios) that might suggest investors should look elsewhere. However, these P/E ratios have been high for a long time, and are more representative of the high demand for the stocks, and the large growth rates still on offer for global companies looking to expand their operations outside of the US.

The IG Fang index looks to replicate an index of ten major tech stocks, such as Amazon, Google, Facebook and NVIDIA. These have been major winners over the past ten years, but show little sign of slowing down. While a more concentrated index than the Nasdaq 100 or the Nasdaq composite, it contains those firms likely to shape the global tech market for years to come.

This is not 2001 – these companies have, in most cases, well proven revenue streams, and strong businesses that have seen excellent growth over the past ten years. The internet and tech stocks have come of age, and will continue to be a major driver of market returns in the years to come.

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Take a position on indices

Deal on the world’s major stock indices today.

  • Trade the lowest Wall Street spreads on the market
  • 1-point spread on the FTSE 100 and Germany 30
  • The only provider to offer 24-hour pricing

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
Sell
Buy
Updated
Change
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Sell
Buy
Updated
Change

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Sell
Buy
Updated
Change
-
-
-
-
-
-
-
-
-
-
-
-
China 300
-
-
-
-

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.