(San Francisco)

A prominent fund manager has just come out with a bold and bearish prediction—that the big multi-year surge in FAANG stocks will fade. Rob Arnott of Research Affiliates says “Will these stocks produce such impressive growth that they will justify their current market cap, or are these implausible growth expectations? We don’t have a crystal ball, of course, but we would recommend not betting on the momentum continuing”. Overall, FAANGs account for $4.2 tn of market cap, a huge concentration in such a small group of stocks, and a big threat to the overall bull market. Arnott is considered the founder of smart beta and has turned Research Affiliates into a firm that manages $184 bn.

FINSUM: The basic argument here is that FAANG valuations have simply grown too large relative to other sectors and are bound to come down. But what is the catalyst?