US Markets are getting hammered on day 1 of US trading and it is easy to get distracted once you settle in to any damage done to your portfolio. Most managers kept their investments in FANG Stocks (Facebook, Amazon, Netflix, Google) and are taking a hit this morning as the sell off is focused on this sector. It is difficult to NOT own these stocks for portfolio managers as they are they straw that stirs the drink in flat equity markets.
Investors in most funds look to see if their money manager profited in FANG. Once this data comes out clients stay or flee, so owning FANG was a necessity with a whiplash this morning as we begin 2016. Facebook (FB) was down 4% and most of the group were outpacing the selling on the downside. I fully expect this group to trade in a wide band in Q1 and continue to add Alpha, but 2016 (much like 2015) will be a year where the best stock pickers keep clients and the poor ones overall assets decline. I believe the number of good managers will contract again in 2016.
The other Index to watch is the iShares China Large-Cap (FXI) currently down 4% and is the driver behind markets this morning. Every portfolio manager has this blinking quote on their desktop as Mainland Chinese shares fell 7 percent, triggering a new circuit breaker that prompted a trading halt, after surveys showed factory activity in the world's second-largest economy shrank sharply in December.
Adding to investors' worries, China's central bank fixed the yuan at a 4-1/2 year low, weakening it against the dollar.
"Those are violent New Year fireworks. That's quite a way to start the day off," said Andre Bakhos, managing director at Janlyn Capital LLC in Bernardsville, New Jersey. "Right now, the focal point is China, the global economic condition, and the fact that we're coming off a disappointing year on many levels, a frustrating year on many levels, only to walk in and have the (S&P) futures down 35 points," he said.
All said...welcome back to the jungle !!
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