By Dr. Sonu Varghese via

The S&P 500 index gained 21.83% in 2017 (including dividends), with most of the underlying sectors enjoying double digit gains, except Energy (-1.01%) and Telecom (-1.25%). Yet as the next chart shows, the Technology sector had out-sized gains that dwarfed everyone else, rising 38.83% over the year. The sector accounted for almost 37 percent of the S&P 500’s 2017 gain despite making up just over 20 percent of the broad index.

Technology had its best year since 2009, when it gained 61.72%, though this was after falling -43.14% in 2008. 2017 was even better than 2013, when the sector rose 28.43% (versus 32.39% for the S&P 500).

Five tech companies – Apple (+48.24%), Microsoft (+40.22%), Google (+35.58% class C shares and +32.93% class A shares),  Facebook (+53.38%), Amazon (+55.96%) – accounted for just over 5 percentage points of the S&P 500’s 21.83% gain, i.e. close to a quarter of the gain even though they made up just about 11 percent of the index at the beginning of 2017.

Some of it could be put down simply to earnings growth. For 2017, the Technology sector reported the third highest earnings growth (14.6% year-over-year) of all 11 sectors versus 9.6% for the S&P 500. Though we do note that the correlation between equity performance and earnings growth is not straightforward – the Energy sector fell despite year-over-year earnings growth of 274.6%.

Click here to read the full story on