They say history does not repeat itself but it rhymes. Today FAANGM stocks, Facebook (FB US), Amazon (AMZN US), Apple (APPL US), Google (GOOG US) and Microsoft (MSFT US) constitute 17% of the total value of S&P 500. This is the same level as Microsoft, Intel (INTL US), Lucent, Oracle (ORCL US) and Dell (DWMT US) were at the height of the IT bubble.
Source: Bloomberg, Gluskin Sheff (David Rosenberg)
We all know what happened next. The IT bubble crashed and plenty of stocks lost almost all their values. Lucent which was one of the 6 big back then, does not exist anymore. It got bought by Alcatel due to poor performance. Interestingly enough, what helped destroy the IT bubble was the Federal Reserve through rate-hikes trying to cool the economy. Today the Fed has started a rate-hike cycle with already raising their rates 3 times this year. History doesn’t repeat itself, but it rhymes.
