The Technology Select Sector SPDR Fund (NYSEArca: XLK), the largest tech-related exchange traded fund, is up 12.40% year-to-date. That after technology was the best-performing sector in the S&P 500 last year.
Even with those superlatives, investors appear comfortable betting on more upside for the S&P 500’s largest sector weight. XLK includes companies from technology hardware, storage, and peripherals; software; diversified telecommunication services; communications equipment; semiconductors and semiconductor equipment; internet software and services; IT services; electronic equipment, instruments and components; and wireless telecommunication services.
“It’s a close race this year between Wall Street’s best-performing sectors: technology and consumer discretionary. Craig Johnson, chief market technician at Piper Jaffray, says one sector takes the lead,” reports CNBC.
XLK and the PowerShares QQQ (NasdaqGM: QQQ), which tracks the tech heavy Nasdaq-100 Index, are usually viewed as growth plays.
That also implies that the technology sector, the largest sector weight in the S&P 500, can trade at valuations that are expensive relative to the broader market. However, tech’s valuations are not as stretched as some investors may think and the sector’s earnings are growing.