AFAMA depreciation

Market Update: 10 August 2020

If you were to Google this (or begrudgingly on Microsoft‘s Bing) on your Apple phone, or ask someone on Facebook or even search for a book on Amazon – you’d find the acronym is related to depreciation in SAP.. but if you put together the big tech companies above in italics (replacing Google for its parent Alphabet) – you’d find 5 companies that are worth over 20%* of the S&P Index. In fact, you’d find that without them on S&P , the value would depreciate by almost 10% from March. They themselves (AFAMA) rallied 70%

Why have I brought this up? well there’s 20,009,061 reasons…  COVID cases globally and consequently 10.2% are unemployed in the US (beating expectations) to consider – with 5.2m cases there alone. The silver lining is that daily cases do look to have peaked from July and unemployment dropped from 11.1%. What happened to the AFAMA stocks and Nasdaq? they fell.

AUD fell too … but maybe we put that into the buy the rumor, sell the fact pile or a USD Index rally as it breaks above the 30% RSI (thus GBP fell to 1.3013) … or maybe we’re looking at a new correlation theme to consider? I’d be doubtful given we don’t sell tech and unless the Universities all go to online for international students, the tech story is quite absent.

It does put into perspective that a) Australia’s ASX is lagging without tech stocks, b) should we get a vaccine soon, perhaps we all go back into work and these stocks actually lose value. So what might seem a GFC redux on steroids with strong sentiment is purely tech stocks going gangbusters for a very good reason given the WFH era.

The week ahead brings Oz unemployment, ZEW surveys in Europe and China data dump on Friday (IP, Retail Sales, FAI) to consider. Good luck!

10 Largest Holdings S&P 500.

*thanks to Goldman Sachs for highlighting it’s now 22%

Apple, Facebook, Alphabet, Microsoft, Amazon (AFAMA) in white, S&P in Blue, In Orange is S&P without AFAMA.

Sources: Bloomberg

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