Why the Technology Sector Was Flat in September
The technology sector in 1H17
The Technology Select Sector SPDR ETF (XLK), which tracks the performance of the technology sector, has remained flat in September 2017. However, this sector remained the top performer among the various sectors of the S&P 500 Index (SPY) (QQQ) so far in this year.
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The ETF rose nearly 20% on a year-to-date basis as of September 28, 2017, and it rose nearly 12.1% in the first half of 2017. Major technology stocks such as Apple (AAPL), Microsoft (MSFT), and Facebook (FB) returned nearly 24%, 10%, and 29.2%, respectively, in the first half of 2017. However, these stocks fell nearly 6.7%, 1.3%, and 2%, respectively, so far in September 2017.
The strong performance of major technology stocks has mainly been driven by their revenue growth, R&D (research and development), and business model. However, in September 2017, major technology firms such as Twitter (TWTR), Facebook, and Google (GOOGL) are being asked to provide evidence regarding Russia’s involvement in the 2016 US presidential election. This news has hampered technology stocks’ performance in September.
According to Mike Wilson, the chief equity strategist at Morgan Stanley (MS), the technology sector will benefit significantly if tax reform takes place. He said in an interview with CNBC in May 2017, “The prospect of tax reform should disproportionately benefit energy, tech, healthcare, telecom and small cap stocks.”
If confidence about the passage of a tax reform bill increases, we might see further upside for these technology stocks.
In the next part of this series, we’ll analyze the performance of the utility sector.