Big Tech Slump May be Short-Lived

The Technology Select Sector SPDR (NYSEArca: XLK), the largest tech ETF by assets, is off 5.5% over the past week. Those declines are prompting some investors to depart the benchmark tech ETF, but outflows from XLK and other ETFs tracking the sector may be short-lived.

XLK “has yet to see the kind of exodus you’d expect with the Nasdaq 100 Index tanking. The fund has had about $400 million of outflows since March 19, following the Facebook Inc. user data scandal, which knocked more than 7 percent off the Nasdaq 100 over the same time frame,” reports Bloomberg.

As of March 26th, XLK and the PowerShares QQQ (NasdaqGM: QQQ), which tracks the Nasdaq 100, had about $2 billion in new assets on a year-to-date basis.

Technology Still An Investor Favorite

While technology, the largest sector allocation in the S&P 500, has seen some recent struggles, many investors remain bullish on the sector.

After surging 37% last year, technology remains a favorite among investors, despite data suggesting technology stocks are relatively expensive as they trade at elevated price-to-earnings compared to the broader S&P 500. Roughly a third of global fund managers say they are overweight tech in their portfolios, according to a recent Bank of America Merrill Lynch survey.

Related: Two Tech Trends Shaping 2018

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.