The technology sector, which historically performs well when interest rates rise, is luring investors back with compelling valuations.
““Tech seems to have become a new Value sector. Growth has slowed, but long-term growth forecasts still far exceed those for the S&P500 while margins & ROE remain impressively high. Unlike many sectors valuations have not drifted much higher since 2009. As a result, Tech trades at a P/E discount to the S&P500 whereas historically it has enjoyed a premium. We think Tech appears relatively attractive at these levels,” said AltaVista Research in a recent note.
The research firm has a neutral rating on the Technology Select Sector SPDR (NYSEArca: XLK), the largest tech ETF. AltaVista estimates XLK’s 2015 P/E ratio will be 16.2, below the 16.6 estimate on XLU. [Tech ETF Becomes a Value Play]
Equity Sector Flows
Table Courtesy: State Street Global Advisors