The latest stock market volatility witnessed the tech sector get a fresh round of sell-offs during the month of January. The worst may or may not be over. Either way, there are ETFs to cover both scenarios.
Inflation fears caused a dismal January for most equities. The tech sector in particular saw a heavy month of sell-offs as the Federal Reserve is expected to start raising interest rates this year.
The tech sell-off was evident in the Nasdaq 100. The index slipped about 9% during the month of January as tech’s heavy hitters took some losses.
Looking ahead, for investors who want to carry on with exposure to the index sans technology can look at the First Trust NASDAQ-100 Ex-Technology Sector Index Fund (QQXT). The index that the fund tracks is equal-weighted, composed of the securities comprising the NASDAQ-100 Index that are not classified as “technology” according to the Industry Classification Benchmark (ICB) classification system.
The tech sector has started to show signs of life, with the Nasdaq 100 index going up about 2% over the last five days. That said, investors who want to maintain tech exposure can look to the First Trust NASDAQ-100-Technology Sector Index Fund (QTEC).
Like QQXT, the index that QTEC tracks is an equal-weighted index. In this case, the index is composed of the securities comprising the NASDAQ-100 Index® that are classified as “technology” according to the Industry Classification Benchmark classification system.
Tech or No Tech?
While big tech names continue to roll out earnings, there could be more choppiness ahead as investors continue to watch the inflation situation. In the meantime, more positive earnings results could give tech an opportunity to regain strength or see more downward pressure.
“Diverging earnings from megacap growth stocks are fueling wild swings in equities, opening the door for more volatility on the heels of last month’s sharp drop as investors grow more discerning in the names they pick,” a Reuters report says.
“Many investors started trimming holdings of tech stocks even before the earnings season kicked off as future earnings growth promised by the sector loses its appeal when central banks raise rates, increasing the immediate financial rewards of holding risk-free government bonds,” the report adds.
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