The Technology Select Sector SPDR (NYSEArca: XLK), the largest technology exchange traded fund by assets, is up more than 12% year-to-date and has recently been hitting record highs. The technology-heavy Nasdaq Composite has also been hitting record highs.
Those could be signs that the technology sector, the largest sector weight in the S&P 500, is dealing with something it was previously opposed to: Donald Trump in the White House. Actually, there could be some advantages for big technology companies if President Trump is able to push forward various part of his economic and tax agendas.
The tech sector could even see more free cash on hand if Congress proceeds with plans to cut down capital gains on repatriated earnings or follow in President-elect Donald Trump’s proposed repatriation tax holiday policy that would encourage large multi-national companies to bring back hundreds of billions of dollars in cash to the U.S. for possible use in dividends, deals or other projects. Trump plans to levy a 10% repatriation tax on U.S. companies’ overseas profits from foreign subsidiaries, compared to the current 35% tax rate.
“Analysts also believe that tech companies are likely to be some of the top beneficiaries of Trump’s proposed policies, especially tax reform. Cisco is likely to be a top beneficiary of lowered taxes on the repatriation of foreign cash, according to research from Strategas Research Partners. Apple could also be a winner, according to Baird’s Will Power,” reports CNBC.