Spring has sprung for tech stocks. The Nasdaq Composite Index rallied to a fresh record on Friday, capping an 11% gain since its 8 February low as investors poured back into the nine-year old bull market’s biggest winners.
Indexes for every other corner of the market, from mega-caps to small-caps to the S&P 500 have yet to reclaim the same milestone.
It’s a return to form for the tech titans — from Apple to Amazon.com — that briefly lost their lustre as the market convulsed in February. Investors poured almost US$616m into the biggest exchange-traded fund tracking the industry on Thursday, the most since December 2011. The Nasdaq sank 5.1% in the week ended 9 February, the most since early 2016.
“In an environment where the market seems to be favouring growth, that’s where investors can go to get growth,” said Gary Bradshaw, a portfolio manager at Hodges Capital Management in Dallas. “In an economy that’s strong, it seems like tech stocks are growing even faster than the economy. It was a great place to be last year and so far early this year it’s still a good place to be.”
Tech earnings are forecast to rise 31% in 2018, the second most among 11 S&P 500 industries after energy. The shares underpinned one of Wall Street’s most successful strategies in 2017 — simply sticking with winners — as momentum outpaced just about everything else.
The S&P 500 remains 3.2% below its all-time high, while the Dow average sits 5% off its record. — Reported by Sarah McDonald and Sarah Ponczek, with assistance from Carolina Wilson, (c) 2018 Bloomberg LP