Elliott Wave Options: Banking Crisis Helps FAANG Stocks Up!
The current banking crisis is causing a shift in behavior. Consumers are pulling money out of smaller banks, and placing those deposits with larger banks. This flight to safety is putting smaller banks at risk of a bank run, as reflected in their wildly swinging stock prices.
It’s also causing consumers – in their role as investors – to rethink the financial safety of the companies that they’re investing in.
That means investors may want to shift their wealth towards cash-rich companies. That avoids having to deal with companies that may be dependent on financial markets for more funding during a crisis.
That’s why the current bank woes are giving many big-name tech stocks a move higher. The big-name tech stocks, particularly the FAANG companies, are cash flow giants. They don’t need to take on any debt or draw down a bank line of credit to operate.
And it’s this lack of a need for the banking system right now that makes them look like they could be strong performers.
Of course, risks still remain. Bigger dangers to the banking system could cause all assets to move lower. Under such a scenario, however, tech stocks would likely drop less than bank stocks.
As a play on relative safety, and given the selloff in tech in 2022, however, this could be a solid contrarian play now.