ETFs Reflect Technology Sector's Push Past Financials | ETF Trends

  Winning is an elusive act, so if you change your perspective on what sector is ahead, which exchange traded fund (ETF) is actually ahead?

Most investment professionals use the S&P 500 to gauge the performance of U.S. stocks. Earlier this week, the information technology sector accounted for 16.3% of the index, while financials dropped to 16.2% of the index. That means for the first time since 2002, the market capitalization of the sector fell below that of technology, reports John Spence for Market Watch.

Since the mid-1990s, tech and financials have been neck-and-neck to
be at the top of the stocks, marked by volatile market swings such as
the dot com boom/bust and now the credit squeeze that began last summer. At the market top in 2000, the internet frenzy pushed tech stocks to 34.5% of the market. At their bottom in October 2002, they were 13% of the market, while financials were 20%.

Once again, tech stocks are ahead, but they didn’t earn it. And make no mistake: the sector is still down – it’s just down less. Financials have just been hit enough that it’s allowed them to pull ahead. The down-trodden financial sector has been reflecting the rough times in its ETFs:

  • SPDR Financial (XLF), down 12.9% year-to-date
  • Vanguard Financials (VFH), down 11.4% year-to-date
  • iShares Dow Jones US Financial Services Index Fund (IYG), down 13.6% year-to-date

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Some technology ETFs:

  • Nasdaq 100 Trust (QQQQ), down 5.5% year-to-date
  • Internet HOLDRs (HHH), down 2.1% year-to-date
  • Vanguard Information Technology VIPERs (VGT), down 6.6% year-to-date

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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.