uploads///Technology Sector Outperforming the Broader Market

Should Investors Look to Tech Stocks despite Trade War Concerns?


Jun. 25 2018, Updated 9:50 a.m. ET

Performance of technology sector so far this year

The Technology Select Sector SPDR ETF (XLK), which tracks the performance of the technology sector, has risen 11.5% on a year-to-date basis as of June 22, 2018. Similarly, the ETF rose 25.8% in the past one year. The technology sector remained the top performer among the S&P 500 Index (SPY) sectors in 2017 with returns of 34%.

The US-China trade war tension is likely to affect the US technology sector as well as the semiconductor industry, as many such companies have huge exposure to China. China remained a major trading partner and the biggest technology supplier to the US. So any change in their trade relationship will likely have a broad effect on this sector. In the above part, we discussed that Apple’s stock price tumbled a bit due to rising trade war concerns.

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However, major technology giants such as Facebook (FB), Netflix (NFLX), and Alphabet (GOOGL) have been rising sharply since the start of June 2018 despite the US-China trade war issue. In the previous part of this series, we discussed that Facebook and Netflix don’t have exposure to China. Alphabet also has very marginal exposure to China. China has blocked Alphabet’s search service and its various products in the country since 2010. Thus investment in these tech stocks could be profitable given these stocks have marginal exposure to China.

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