Macroscope | When unease over tech stocks meets Japanese bond wobbles, investors should watch out

Since the turn of the millennium, there has been a surfeit of abbreviations that have come to dominate the financial lexicon, ranging from the BRIC – the quartet of Brazil, Russia, India and China which became a shorthand for the rise of emerging markets – to QE, or quantitative easing, the large-scale purchases of assets by central banks that have been the mainstay of ultra-loose monetary policy.

Over the past week, two abbreviations have grabbed the headlines: FAANG and YCC. Two or three years ago, both terms did not even exist, or were just beginning to catch on. Now, they are the subject of intense scrutiny on the part of international investors.

The FAANGs refer to the five high-flying US technology firms – Facebook, Apple, Amazon, Netflix and Google’s parent Alphabet – that have driven the rally in global equity markets over the past few years. According to Bespoke Investment Group, a US consultancy, the FAANG bloc, which accounts for 13.6 per cent of the benchmark S&P 500 index, has created as much value this year as the rest of the index put together.

The term YCC, meanwhile, refers to the yield curve control scheme introduced by the Bank of Japan (BOJ) in 2016, designed to keep the yield on the country’s 10-year bond at close to zero per cent as part of an aggressive easing of monetary policy aimed at putting an end to decades of on-and-off deflation. With the Federal Reserve and the European Central Bank at different stages of removing stimulus, the BOJ is the last man standing in the post-2008 world of super-loose policy.