Political scandal and the backlash against major tech companies are an impending threat to American equities, the CEO of an asset management firm has warned, advising investors to short the U.S. market despite record highs.
Gillaume Touze of Quadra Capital Partners does not hold the mainstream view on booming tech stocks, many of which have seen more than 50 percent returns year-to-date.
So he raised eyebrows during an appearance Thursday on CNBC's "Squawk Box Europe" when he revealed his firm's strategy of shorting big names in the U.S. market, calling a bear market by the second half of this year.
"We believe that the volatility is going to very much remain," Touze said of major tech stocks, noting the fall in Facebook, Alphabet and Twitter's stock prices at the market's close Wednesday after U.S. lawmakers grilled tech executives on Capitol Hill over ethics and security issues. Twitter was down 6 percent on the day by the end of the hearing.
"The pressure coming from the media is likely to continue to be very tough for the FAANGs, we believe. We've been short some of those big names for quite a bit," he said, using the acronym for the market's five most popular tech stocks, namely Facebook, Apple, Amazon, Netflix and Alphabet's Google.
Quadra Capital Partners, which specializes in total return investment strategies, is currently favoring smaller names. "That volatility combined with political turmoil is making us overall short on the key markets, particularly the U.S. one," Touze said.
This is a bold argument to make, given that the FAANGs — with the exception of Facebook — have all made massive gains this year. Netflix and Amazon are up an eye-popping 81.7 and 69.6 percent, respectively, with the latter briefly hitting the $1 trillion market cap figure on Tuesday. Apple was the first company to breach the $1 trillion mark in early August. Twitter is up about 33 percent, while Facebook is down nearly 6 percent on the year, beleaguered by scandals and a dramatic 20 percent plunge in July on the back of a bad earnings call.