Technology stocks and ETFs are among the broader markets leadership groups this years. Software stocks are playing pivotal roles in tech’s 2019 rebound. Just look at the Invesco Dynamic Software ETF (NYSEArca: PSJ), which is up more than 20% year-to-date.
PSJ also hit an all-time on Wednesday. Investors are beginning to look at tech stocks as a safety play, betting that the double-digit gains will continue on rising earnings growth, despite concerns over global trade conditions. According to BofA Merrill Lynch data going back to 1995, tech stocks were among the best performers in the 30-days after a trade action is announced, whereas the broader stock market typically takes a hit following trade concerns.
PSJ follows the Dynamic Software Intellidex Index and is a smart beta alternative to traditional cap-weighted software ETFs.
That index “is designed to provide capital appreciation by thoroughly evaluating companies based on a variety of investment merit criteria, including: price momentum, earnings momentum, quality, management action, and value,” according to Invesco.
What Powers PSJ ETF
PSJ is home to 30 stocks and features exposure to a variety of software companies, including application data software makers, enterprise software firms and video game publishers.
PSJ holdings “are principally engaged in the research, design, production or distribution of products or processes that relate to software applications and systems and information-based services,” according to Invesco.
With the economic cycle entering its late stages, higher beta companies could start reigning in spending, which is something to watch for with technology names.
Additionally, smaller stocks play important roles in PSJ’s performance as just 35% of the fund’s holdings are considered large-cap names. Over 44% of PSJ’s holdings are classified as mid-caps. Not surprisingly, PSJ is mostly a growth fund. Ove4r 85% of the fund’s components are considered growth stocks.
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