XLK 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. Top holdings include Apple (NasdaqGS: AAPL), Microsoft (NasdaqGS: MSFT) and Facebook (NasdaqGS: FB).
While earnings multiples on tech stocks have jumped this year, investors should not expect another tech bubble on par with what was seen in 2000. In fact, the largest tech stocks today are far less pricey than their counterparts were in 2000.
“The relationship between tech stocks and the S&P has not always been this close. Over the last six months, tech has tied with consumer discretionary for the highest correlation with the S&P at 0.82, according to Kensho,” reports CNBC. “Over the last two years, tech falls to third place behind industrials and consumer discretionary, the analysis showed.”
For more information on the tech sector, visit our technology category.
Tom Lydon’s clients own shares of QQQ, Apple and Facebook.