As for technology, the Technology Select Sector SPDR (NYSEArca: XLK) is coming off a 26.2% gain last year, though it should be noted XLK’s upside was constrained by a paltry gain by Apple (NasdaqGM: AAPL) and International Business Machines (NYSE: IBM) being one of the Dow Jones Industrial Average’s worst performers.
Still, tech is not stretched on valuation and the sector is home to some of the most prodigious dividend growth in the U.S. [Digital Dividends in This ETF]
There is another catalyst that could favor further upside for cyclical sector ETFs this year: Rising interest rates. In rising rate environments, discretionary, industrials and tech are usually the top-performing sectors. Ten-year Treasury yields closed at 3% on Friday, but some economists see a move to the 3.3% to 3.4% (or higher) area as likely this year.
Industrial Select Sector SPDR
ETF Trends editorial team contributed to this article. Tom Lydon’s clients own shares of Apple and General Electric.