FANG Dominates The Market: Can You Go Long Anything Else?

COVID-19 Update

There is a seesaw-like relationship between the number of COVID-19 tests and the positive rate. If there is a huge spike in tests, cases will likely increase modestly and the positive rate will likely fall. If testing falls, cases fall and the positive rate rises. That’s what we saw on Friday, July 31. As you can see in the chart below, there were only 718,956 tests, which pushed up the positive rate. 

Did people decide they didn’t need to get tested, or was there a limit in the number of tests that could have been done? With the rate in the single digits, most people are testing negative. The government isn’t encouraging widespread testing for people who don’t have symptoms. If less people feel they need a test, testing will fall and there’s nothing we can do about that. This is why hospitalizations and deaths matter. Those aren’t a choice.

Specifically, there were 70,904 cases on Friday, which sounds bad, but it actually brought the seven day average down because there were 78,407 last Friday. There are almost always the most cases on Friday, and the least on Sunday and Monday. There were 1,462 new deaths. 

We can expect next week to either show no increase in deaths or a slight decrease. A decline will pick up steam as August goes on. Hospitalizations peaked along with cases, which means deaths will fall. Major League Baseball is grappling with the prospect of canceling the season which likely hurts sentiment on the possibility of children going back to school. At least the hotspots have cooled off modestly in the past week.

FANG Rules The Day

In the past couple months and the past six years, the FANG stocks have ruled the market. In fact, the bottom 495 stocks have barely had any returns in the past few years. Friday was a continuation of the trend, except extreme. NYSE advance decline was -526. 

In the afternoon, there was a point where the Nasdaq 100 was up 1.25% and 75% of the stocks in it were down. S&P 500 closed up 0.77% and the Nasdaq closed up 1.49%.

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