The FANG Stocks And Their Influence On The Broader Market

By | June 4, 2018

The Nasdaq Composite is an index of over 3,300 common equities listed on the Nasdaq stock exchange. It is up 10% since its April low this year. An impressive two month gain.

The index is a market-value-weighted index. That means its components are weighted according to the total market value of their outstanding shares. Currently, the FANG stocks account for about 38% of the NASDAQ Composite weighting. By comparison the FANG stocks account for 12% of the also market-cap weighted S&P 500 Index. The S&P index is up 6% since April this year and the price-weighted Dow Jones Industrial Average is only up 4% in that time.

This mean that Facebook(FB), Amazon (AMZN), Netflix (NFLX), and Alphabet (GOOGL) together have a powerful influence on the movement of the NASDAQ index. When they outperform the NASDAQ generally outperforms.

But the reverse correlation is also true and if the FANG stocks are sold off the NASDAQ Composite, which is leading the S&P 500 and the DJIA indices, will take a hit. And if the leading index fades it could weigh on the other major indices.

This progression as outlined, suggests the course of four stocks has an inordinate influence the entire broader market.

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