Technology ETFs Can Still Thrive in a Recession

While healthcare and consumer staples are the go-to sectors in a recession, technology can still thrive even in a market downturn. As such, investors might want to consider taking a closer look at technology exchange-traded funds (ETFs) as a value-infused option.

“[Tech] stocks are growing faster than the broader market, so if you invest in them you’re getting exposure to this growth and companies that are changing the world,” said Ryan Hughes, head of active portfolios at broker AJ Bell.

Tech ETFs to Consider:

  • Technology Select Sector SPDR ETF (NYSEArca: XLK): The Technology Select Sector SPDR Fund tries to reflect the performance of the Technology Select Sector Index, which is comprised of technology and telecom sector of the S&P 500. The ETF 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.
  • Fidelity MSCI Information Technology Index ETF (FTEC): The First Trust Nasdaq-100 Tech Index tries to reflect the performance of the Nasdaq-100 Technology Sector Index, which consists of companies in the Nasdaq-100 Index classified as technology according to the Industry Classification Benchmark. QTEC currently holds 34 components and more-or-less equally weights its holdings.
  • iShares U.S. Technology ETF (NYSEArca: IYW): The iShares U.S. Technology ETF reflects the performance of the Dow Jones U.S. Information Technology Index, which includes all tech sector picks in the Dow Jones U.S. Index. Due to the Dow Jones’ classification of information tech names, healthcare technology stocks may be included while payment technology stocks are excluded.

Even while the Federal Reserve is cutting interests as their outlook on economic growth dampens, technology can still thrive. In fact, low rates can be good for large tech companies.

“Low interest rates can be good for tech because the growth rates that you see in tech continue to look very good compared with the rest of the market,” said Adrian Lowcock, head of personal investing at Willis Owen. “Large companies are not particularly indebted and lower interest rates can make it even easier to clear debt.”

One specific area of interest is cloud computing technology. As more and more companies look to the cloud to center their core businesses around, investors can look to ETFs that capitalize on this growing industry trend.