Cybernews
  • News
  • Editorial
  • Security
  • Privacy
    • What is a VPN?
    • What is malware?
    • How safe are password managers?
    • Are VPNs legal?
    • More resources
    • Strong password generator
    • Personal data leak checker
    • Antivirus software
    • Best VPN services
    • Password managers
    • Secure email providers
    • Best website builders
    • Best web hosting services
  • Follow
    • Twitter
    • Facebook
    • YouTube
    • Linkedin
    • Flipboard
    • Newsletter

© 2021 CyberNews - Latest tech news, product reviews, and analyses.

Our readers help us create quality content. If you purchase via links on our site, we may receive affiliate commissions. Learn more

Home » Editorial » Analysis: Tech’s reign over U.S. stock market to be tested in 2021

Analysis: Tech’s reign over U.S. stock market to be tested in 2021

by Reuters
28 December 2020
in Editorial
0
The U.S. flag is seen on a building on Wall St.

REUTERS/Brendan McDermid

12
SHARES

Investors are weighing how big to go on U.S. technology stocks in the coming year, as pricier valuations, regulatory risks and a revival of the market’s beaten-down names threaten to dim their allure. 

A surge in technology and internet-related shares helped lift U.S. indexes to record highs this year. Gains in Apple, Amazon, and Microsoft alone accounted for more than half of the S&P 500’s 16.6% total return as of Dec. 16, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.

Tech took a back seat in recent weeks, as hopes of a vaccine-led economic recovery fueled a rally in energy, financials, small caps and other less-loved parts of the market. The Russell 1000 value index climbed 10% since breakthrough vaccine data was announced in early November, compared to a 4% gain in the Russell growth index, which is broadly populated by tech stocks.

Though it is unclear how long the change in market leadership will last, the shift highlights a dilemma that has confronted investors throughout the last decade. Limiting tech exposure has mostly been a losing bet for years and the coronavirus pandemic accelerated trends that stand to benefit the group.

But valuations near 16-year highs are raising concerns about the sector’s vulnerability, especially if a U.S. economic reopening creates a sustainable trade in value stocks.

“I think that people are going to stick with their tech exposure but I don’t think there is going to be a lot of fresh money put into tech in the new year,” said Lindsey Bell, chief investment strategist at Ally Invest.

The technology sector along with shares of big tech-related companies — Amazon, Google-parent Alphabet and Facebook — account for about 37% of the market-cap weighted S&P 500, giving them outsized influence on the index’s gyrations and investors’ portfolios. Fund managers polled by BofA Global Research named “long tech” as the market’s most crowded trade for the eighth straight month. 

And while tech, which trades at 26 times forward earnings estimates, is one of the few sectors expected to post profit growth in 2020, according to IBES data from Refinitiv, earnings are projected to grow by 14.2% next year, slower than the 23.2% clip seen for S&P 500 companies overall on a potential bounce in growth.

“We continue to believe that this value rotation we started to see over the last few weeks does have legs into 2021 as well,” said Mona Mahajan, U.S. investment strategist at Allianz Global Investors.

Efforts by U.S. and European regulators to curtail the market dominance of companies such as Alphabet and Facebook are another pressure point for the industry. 

But plenty of investors are happy to retain holdings in businesses that have proven durable amid slow economic growth, trade conflicts and the global pandemic. Indeed, spikes in uncertainty have tended to send investors into tech stocks in recent months. 

“There are very few sectors where you can get as predictable … growth as you can from technology,” said Mark Stoeckle, chief executive officer of the Adams Funds, whose diversified equity fund’s top holdings are Microsoft, Apple and Amazon.

Assets in the Invesco QQQ Trust, which tracks the tech-heavy Nasdaq 100 index, this month hit their highest amount on record, Lipper data showed.

Michael Arone, chief investment strategist at State Street Global Advisors, expects the economy to return to slower growth rates after recovering in 2021.

“That suggests you want to own companies (that have) high organic growth rates and can compound cash flow better than others,” Arone said. 

Even some strategists who like other stocks aren’t straying far from tech. BMO Capital Markets cut tech to “market weight” for 2021 but urged investors to maintain positions rather than sell. 

“I don’t think we are just going to move away from tech,” said Esty Dwek, head of global market strategy at Natixis Investment Managers. “These businesses have become integral parts of our lives.”

(Reporting by Lewis Krauskopf; Additional reporting by Shreyashi Sanyal in Bengaluru; Editing by Ira Iosebashvili and Daniel Wallis)

Share12TweetShareShare
Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

I agree to the Terms & Conditions and Privacy Policy.

Editor's choice

500M LinkedIn user records sold on hacker forum
News

Scraped data of 500 million LinkedIn users being sold online, 2 million records leaked as proof

by CyberNews Team
6 April 2021
5

We updated our leak checker database with more than 780,000 email addresses associated with this leak...

Read more
LinkedIn, FB, Twitter, Clubhouse apps seen on an iPhone

Recent Facebook, LinkedIn and Clubhouse leaks explained

15 April 2021
Cheapest tool to kill satellites? A computer

Cheapest tool to kill satellites? A computer

13 April 2021
A gift to criminals and tyrants? Soon, wireless devices could become object sensors

A gift to criminals and tyrants? Soon, wireless devices could become object sensors

13 April 2021
“Not ideal” from a privacy standpoint: Clubhouse API lets “anyone” scrape public user data

“Not ideal” from a privacy standpoint: Clubhouse API lets “anyone” scrape public user data

12 April 2021
  • Categories
    • News
    • Editorial
    • Security
    • Privacy
  • Reviews
    • Antivirus Software
    • Password Managers
    • Best VPN Services
    • Secure Email Providers
    • Website Builders
    • Best Web Hosting Services
  • Tools
    • Password Generator
    • Personal Data Leak Checker
  • Engage
    • About Us
    • Send Us a Tip
    • Careers
  • Twitter
  • Facebook
  • YouTube
  • Linkedin
  • Flipboard
  • Newsletter
  • About Us
  • Contact
  • Send Us a Tip
  • Privacy Policy
  • Terms & Conditions
  • Vulnerability Disclosure

© 2021 CyberNews - Latest tech news, product reviews, and analyses.

This website uses cookies. By continuing to use this website you are giving consent to cookies being used. Visit our Privacy Policy.
Subscribe For Security Tips And CyberNews Updates
Email address is required. Provided email address is not valid. You have been successfully subscribed to our newsletter!
Our Privacy Policy and Terms & Conditions

Home

News

Editorial

Security

Privacy

Resources

  • About Us
  • Contact
  • Careers
  • Send Us a Tip

© 2020 CyberNews – Latest tech news, product reviews, and analyses.