Financial Sense Newshour recently spoke with well-known market technician Robin Griffiths to discuss the outlook for FAANG stocks, the ongoing global slowdown, and when he is projecting a market peak for this cycle. To hear this full audio podcast, see Robin Griffiths on Death of FAANG, Global Slowdown.
Here's what he had to say...
“I think what has ended is the period of time led by the FAANG [Facebook, Apple, Amazon, Netflix and Google] stocks—that's over now. That is well and truly over. We're not saying the FAANGs are going to go bust or anything like that but what they’re likely to do is come down to a valuation basis that makes sense…where their business is valued on a way that is sustainable and they probably start paying dividends and all those sorts of good things. And [remember] we've seen this before, back in the 60s it was the NIFTY 50; this time around it's the FAANG stocks."
Is There a Storm Headed Our Way?
"I think you’ll find that [investor] confidence is now at a very low level even though the U.S. economy is in pretty good shape—certainly relative to other economies it’s in very good shape. The confidence is nonetheless gone. There’s a willingness to sit on maximum amounts of cash or to buy only very cautious investments and we already had what was the longest running bull market in recorded history. We all knew we were on borrowed time. It wasn't going to last forever or even much longer, although the U.S. market will probably get into next year before the final, final high.
But the rest of the world is already no longer in a bull market. The rate of growth of the global economy is clearly slowing down [though] from pretty good numbers. India is still growing at about 8.0 percent, China, even in its slowdown, formally is growing at about 6.0 percent and the USA is growing at 4.5 percent, which is a pretty good number for a thing the size of the USA. But in Europe, even the powerful German economy is not growing anymore.
Then you’ve got the demographic things: Baby boomers aren’t going to be driving anything [economically-speaking] for a while and the next generation is too small to drive anything. And even the millennials who will drive a boom—they’re not really old enough to be in the driving seat just yet.
So we’re going to go through a bumpy period and…wise men like Ray Dalio are going out of their way to point out to the world, 'Look guys I can see something pretty nasty in our future. I don’t think it’s just yet but down the road we can hear this storm coming – make sure you’re positioned to survive that.'"
Is the Market at a Top?
"It isn’t the top of the economy yet. It’s very much, in the U.S., a stock market correction and the economy is likely to stay strong for another 12 months. Looking further ahead than that, the Dalio's of this world are pointing out there is going to be a proper correction and that will be big one.
If I had to stick my neck out to make a prediction, the U.S. market will probably rise into the new year but the stocks that are doing the running will be rotated over and it will probably stay strong-ish well into 2019. But, once we get into the period of 2020 to 2023, I don’t think we’re going to be able to avoid a nasty bear market. It won’t be just a U.S. phenomenon, it will be global bear market and that’s when you'll want to spread your assets into all different types of asset classes."