The Fangs are back. High-flying technology stocks were meant to take a breather in 2021, with value and cyclical stocks leading the way amid a broad-based economic recovery. Instead, the Fang+ Plus index – which includes tech giants such as Facebook, Amazon, Netflix and Google – hit all-time highs last week, even as the S&P 500 wobbled following disappointing economic data.

The Fangs were popular in recent years for their defensive properties, promising growth in a low-growth world. Belief in the reflation trade meant they underperformed badly in early 2021 but they’re now outperforming again, reflecting investors’ increased economic concerns.

Such concern is understandable. Bespoke Investment notes Citi's US Economic Surprise Index, which represents how economic data is coming in relative to expectations, is near its lowest levels since May 2020. Similarly, True Insights' Jeroen Blokland notes Germany's Zew economic sentiment index has fallen to its lowest level since March 2020.

GDP growth has probably peaked but markets remain “a bit ahead of themselves”, says Blokland. Fang investors may be happy, but the slowdown in business sentiment “represents downside risk” for the broader indices.