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Facebook, Amazon, Apple, Google’s parent Alphabet and Microsoft have added to the stock market a total of US$4.3-trillion in market capitalization since the financial crisis. REUTERS/File PhotosREUTERS FILE PHOTO/Reuters

The past decade was an extraordinary one for stock markets, with almost everything notching up huge gains. But if one were to encapsulate the period it would be “the decade of the FANG stocks.”

The make-up of this grouping varies. The original FANG club was Facebook Inc. (FB-Q), Inc. (AMZN-Q), Netflix Inc. (NFLX-Q) and Alphabet Inc., originally Google, (GOOGL-Q) but many added Apple Inc. (AAPL-Q), to make it FAANG, and Inc. (CRM-N), to make FAANGS. Some analysts even shoehorned Microsoft Corp. (MSFT-Q) – FAMANGS? – into the group, while the New York Stock Exchange’s FANG+ index includes the likes of Tesla Inc. (TSLA-Q) and Twitter Inc. (TWTR-N) along with China’s Alibaba Group Holding Ltd. (BABA-N) and Baidu Inc. (BIDU-Q).

Today, the grouping is shorthand for the big, fast-growing U.S. technology stocks that utterly dominated equity returns in the 2010s. The question now is whether the 2020s will be another FANG decade, or whether other parts of the stock market will usurp them.

Projections are hazardous. But most investors and analysts expect tech companies to continue to reign in the coming decade – even if the leadership among them changes.

“Technology is still going to be quite dominant,” says Peter Oppenheimer, chief global equity strategist at Goldman Sachs Group Inc. “There’s been unbelievable growth in some companies, which have become mega-caps. It’s plausible that there are companies that don’t even exist today that will be big in a decade’s time.”

Although every major sector has enjoyed strong gains, it is hard to overstate the importance of U.S. tech stocks to the post-financial crisis market recovery. Facebook, Amazon, Apple, Google’s parent Alphabet and Microsoft have added to the stock market a total of US$4.3-trillion in market capitalization. That is more than the value of the U.K. stock market and almost as much as China’s mainland stock market.

Technology now accounts for more than 25 per cent of the U.S. stock market’s value, making it the biggest sector by some distance. While its dominance pales next to that of energy and materials in the first three quarters of the 20th century – or that of railway stocks in the second half of the 19th – its position now seems hard to dislodge.

Aside from a brief period in the mid-2000s when finance companies were flying high, tech has been the largest U.S. stock market sector since 1990. Mr. Oppenheimer sees little chance of that changing.

“Historically, the stock market reflects the main drivers of the economy, and it tends to last,” he says.

However, the rally has left many of the FANG stocks – and the broader cohort of large, fast-growing U.S. tech companies – looking expensive. That makes the next decade dicier when it comes to returns.

Tech companies may continue to expand their businesses, but that does not mean that their stocks will thrash everything else to the same extent. For example, Microsoft’s stock peaked above US$59 in December 1999, but it took 16 years to hit that level again after the dot-com bust – even though the Redmond, Wash.-based company more than doubled its profits over that period.

Moreover, “Big Tech” faces a number of potential pitfalls, such as regulatory crackdowns, deglobalization and backlashes from consumers, says Andrew Milligan, head of global strategy at Aberdeen Standard Investments.

Mark Haefele, chief investment officer at UBS Wealth Management, thinks investors should instead look toward adjacent, emerging sectors, such as stocks “focused on sustainable investing, digital transformation, genetic therapies and alleviating water scarcity.”

Mr. Oppenheimer, too, reckons that companies that benefit from the fight against climate change might do particularly well in the years ahead.

“A lot of countries are committing legally to decarbonization, and that requires massive investments in new technologies,” he says. “It will create significant growth companies we haven’t even heard of yet, but it could also reshape a lot of big companies we have heard of, especially the energy majors.”

While there is a push to force big investors to ditch companies that extract hydrocarbons from the ground – along the lines of old campaigns against tobacco – this may miss a fundamental reshaping of the energy sector, Mr. Oppenheimer argues.

“It’s all fine to shun oil companies, but given the scale of investments needed they will probably have to be part of the solution,” he says.

An old favourite may come back to the fore as well. Kristina Hooper, chief global strategist at Invesco Ltd., argues that emerging markets “look very attractive” for the coming decade, given how they have lagged behind developed ones for much of the post-crisis period, despite enjoying far better economic outlooks.

“Technology will continue to outperform, but the next decade will be a decade of emerging markets outperformance,” she says. “You have a maturing middle class, with better balance sheets and better demographics.”

However, it may be that in 10 years’ time, sectoral definitions that are always somewhat arbitrary will have broken down completely. Even the idea of a “technology company” could be an anachronism.

“By then we’ll probably say that tech is so diffused across all sectors that we’ll be asking what ‘tech’ even is,” Mr. Milligan says.

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