Technology, Growth Took Center Stage for Gains in 2019

Market experts are expecting a modest year of gains in 2020 after 2019 rewarded those investors who didn’t sit on the sidelines and stayed invested in the markets even after a rough fourth-quarter ending to 2018.  Technology and growth equities, in particular, took center stage for gains in 2019, which translated into strength for select ETFs.

One of the beneficiaries of a strong 2019 was the Technology Select Sector SPDR ETF (NYSEArca: XLK). XLK seeks investment results that correspond generally to the price and yield performance of publicly traded equity securities of companies in the Technology Select Sector Index.

XLK has been a stellar performer, hitting just over 50% in gains YTD based on Yahoo Finance performance numbers. Its top 10 holdings includes heavy hitters in tech like Microsoft and Amazon.

“Technology was the brightest spot with large-cap stocks like Microsoft and Apple climbing higher and market cap weighted ETFs that own heavy stakes, such as XLK … significantly outperforming the broader market,” said Todd Rosenbluth, head of ETF and mutual fund research at CFRA.

Growth Still Growing?

One of the ongoing debates in 2019 was whether value could overtake growth, but the latter resisted a volatile summer and continued to see gains heading towards year’s end. One fund in particular that exhibited strong performance was the Invesco S&P 500 GARP ETF (NYSEArca: SPGP).

SPGP seeks to track the investment results of the S&P 500® GARP Index. Strictly in accordance with its guidelines and mandated procedures, the index provider compiles, maintains and calculates the underlying index, which is designed to track the performance of approximately 75 growth stocks in the S&P 500® Index that exhibit quality characteristics and have attractive valuation.

The fund is up almost 40% YTD based on Yahoo Finance metrics, and its top 10 holdings also includes tech stars like NVIDIA Corp, Facebook and Google’s parent company Alphabet.

As Matt Krantz pointed out in Investor’s Business Daily, a low-cost environment for ETF investors makes it “easy to keep costs rock-bottom low and diversify across asset classes. All the major brokers eliminated trading commissions on ETFs in 2019, making them even cheaper ways to get invested.”

This has resulted in ETFs taking the spotlight in recent years and that trend should persist heading into 2020.

“As we enter the 2020s, indexing and ETFs are no longer a side show, they’ve become the main event,” said Ben Johnson, Morningstar’s director of global exchange traded fund research. “To the extent that this has resulted in significant cost savings for investors, this is something to celebrate.”

For more market trends, visit ETF Trends.