U.S. equities have typically enjoyed a good run during the fourth quarter the year, with technology stocks and sector-related exchange traded funds usually taking the lead.
Sam Stovall, U.S. equity strategist at S&P Capital IQ, calculated that since 1990, the S&P 500 index has averaged a 4.9% gain in the fourth quarter, reports Josh Lipton for CNBC.
Since 1995, the technology sector has returned an average 4.6% and rose 71% of the time, or five out of seven instances, during the last three months, according to Kensho.
Over the past three months, the Technology Select Sector SPDR (NYSEArca: XLK) fell 4.8%, iShares U.S. Technology ETF (NYSEArca: IYW) declined 5.6% and Vanguard Information Technology ETF (NYSEArca: VGT) decreased 5.4%.
XLK tracks the S&P Technology Select Sector Index. IYW follows the slightly more comprehensive Dow Jones U.S. Technology Index. VGT reflects the performance of even broader MSCI US Investable Market Index of information technology companies.
The tech sector dropped about 4.1% during the third quarter, its worst performance since the fourth quarter of 2012.
However, the tech sector could be turning around. As a growth-centric sector, the area typically leads during a market rally. Consequently, in the fourth quarter, technology stocks may see a boost as money managers shift money to winning stocks and away underperformers before the year-end.
Companies may scramble to spend their cash hoards before the year-end, or engage in so-called budget flush. If companies have not used money on new technologies yet, they are likely to spend near the end of the year.
Additionally, all the latest consumer technologies are put in the limelight during the holiday season.
Technology Select Sector SPDR
For more information on the tech sector, visit our technology category.
Max Chen contributed to this article.