The Answer to a Widespread Question: FAAANM

One of the most common questions that we have heard over the past weeks and months is some version of this: “how has the stock market recovered to its pre-COVID levels”? On the surface, this move in the S&P 500 simply does not make sense and appears unsustainable.

Pulling back the covers we see some of the factors that are at play. Have you heard of FAAANM? If not, surely you are familiar with the stocks those letters reference, specifically Facebook, Amazon, Apple, Alphabet, Netflix (or should it be Nvidia?) and Microsoft. These mega-tech darlings have moved up sharply in 2020 as so many more Americans are spending time (aimlessly) scanning posts on Facebook, searching Google (Alphabet) for news updates, binge- watching Breaking Bad or Ozark on Netflix, ordering hand sanitizer (if it can be found) on Amazon and all while sitting on the couch with a new Apple iPad and data somehow finding its way into Microsoft clouds. Yes, 2020 is the year of COVID-19 and FAAANM.

Need more proof? Look at the chart below. Without these stocks, the S&P 500 has not recovered its losses for the year. Au contraire mon frere. That bellwether benchmark is down over 9% in the first half of 2020 while the FAAANM stocks are up nearly 24%.

Source: AMG Distributors

Past performance is no guarantee of future results.

Source: YCharts

Past performance is no guarantee of future results. Investors cannot directly invest in an index and unmanaged index returns do not reflect any fees, expenses or sales charges.