Stumbling technology stocks could soon face another hurdle if the Federal Reserve follows through on raising interest rates, Credit Suisse strategists said.
"The performance of FAANG stocks [Facebook, Apple, Amazon.com, Netflix and Google's parent Alphabet] relative to the broader market has moved inversely with interest rate direction since 2003," Lori Calvasina, chief U.S. equity strategist at Credit Suisse, and Sara Mahaffy, vice president of U.S. equity strategy at the firm, said in a Monday report.
The inverse relationship implies "a move higher in interest rates in 2H17 could be a challenge for the group," the note said.
Correlation between FAANG relative performance and 10-year yield
Source: Credit Suisse US Equity Strategy, Thomson Reuters/Eikon, S&P Capital IQ/ClariFi, as of June 2017
The Credit Suisse analysis said the exact mathematical correlation between the relative performance of the big internet stocks and the U.S. 10-year Treasury yield is negative 86 percent. When a correlation is 100 percent that means two assets move in sync. A correlation close to negative 100 percent means two assets move in nearly opposite directions.