Josh Brown: FAANG Stocks Rule the School; Bonds Are a ‘Freak Show’

Josh Brown, Ritholtz Wealth Management co-founder and CEO, indicated this week he agreed with bullish market views — especially for large-cap tech stocks — citing strong corporate earnings reports.

“You have really good earnings support for the S&P 500, at least for large caps,” Brown said Monday on CNBC’s “Closing Bell.” He noted that 53% of S&P 500 companies have reported first-quarter earnings, with about 80% beating expectations.

“What else do you want out of the S&P to at least justify the start of the year?” he asked.

Brown was particularly positive about the mega-cap tech stocks known by the FAANG acronym — Meta (Facebook’s parent company), Amazon, Apple, Netflix and Alphabet (Google’s parent company).

It must be a frustrating time for investors with diversified portfolios who decided to tilt away from large-cap growth this year, Brown suggested, noting the Russell 2000 is flat on the year.

The bond market, in contrast to large-cap growth stocks, is a “basket case,” with huge spreads between short-term Treasury bills with only three months separating their maturity dates, Brown said.

“That’s the freak show that’s going on behind the gym where they smoke and flick cigarettes,” Brown said. “The captain of the football team is FAANG.

“These stocks do not look anything like the bond market. The volatility hasn’t been there; the confusion isn’t there. When they have strong reports or product releases, the stocks go up; when they have negative guidance or weak reports, the stocks go down.

“It actually makes a lot more sense what’s going on with large-cap growth, specifically tech, than anything that you’re seeing that has to do with central banking or interest rates or anything like that.

“So I think investors look at that, and they say, ‘Oh, that’s why the Nasdaq’s up 21% year to date,’ and that’s why some of the largest companies have hit at least 52-week highs recently.”

Year to date, Apple and Microsoft account for 39% of S&P 500 gains, Brown said.

Apple, scheduled to report first-quarter earnings on Thursday, will be the final FAANG company to do so, CNBC noted.

Market bears will note that Apple’s already up 30% year to date, Brown said, adding, “If you want to frame it year to date be my guest, but Apple is flat year over year.”

There have been few times when Apple is flat annually, especially in periods when Apple is firing on all cylinders, he said.

(Pictured: Josh Brown)