Technology-focused exchange traded funds are leading the way compared to other US sectors following the market rebound.
Of the 11 sectors in the S&P 500 Index, tech is at the top of the list in terms of inflows, gaining $767 million over the past month, while cumulative flows stand at around $3.4 billion year to date. Average performance is over 6%.
Second on the top sector inflows list is US consumer staples, followed by US utilities and US consumer discretionary stocks. Near the bottom of the list, and which have suffered outflows, are energy and telecommunication services stocks.
Tech ETF options
For US-based investors, the top-rated tech ETFs according to TrackInsight are provided by SPDR and PowerShares.
The Technology Select SPDR Fund (XLK) is rated four out of five stars and costs 0.14%. It is also one of the largest funds in this sector with $20 billion under management. Forbes reported that the second best-performing ETF so far this year is XLK, with a gain of 6.8%, compared to 2.8% for the S&P 500 over the same period. The ETF’s largest weighting is 14.3% in shares of Apple followed by 11.5% in Microsoft.
The PowerShares QQQ (QQQ) has $62 billion under management and costs 0.20%. It is up almost 8% year to date, and is rated three stars by TrackInsight. (See more about ETF ratings here.)
Tech ETFs’ future uncertain
Tech stocks tend to well in cyclical market periods, and the market is still rebounding after a dip in early February, when the volatility VIX index jumped from nine to 37 points. During this dip, XLK dropped almost 3% on 8 February.
However, experts question how long the so-called Trump rally will last. After signing a two-year spending deal and dealing with the child immigration “Dreamers” Act, the Mueller investigation revealed that 13 Russian nationals and three organisations conspired to boost Donald Trump’s campaign, presenting a threat to US democracy and uncertainty in the markets. The investigation is ongoing.
