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Tech Stocks Won’t Lag the Market for Long: Karabell

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The Dow (^DJI) and S&P 500 (^GSPC) hit yet another record high Wednesday but Apple extended its decline, closing just under $429 and capping a 22% decline year-to-date.

Apple's story isn't an outlier-- tech stocks have lagged the broader market this year. The Technology Select Sector ETF (XLK) has gained just 6.3%–less than half the 13.4% gain in the S&P 500.

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This trend won't continue says Zachary Karabell, president of River Twice Research, in the long term technology shares will outperform the market.

“Technology is the only locus of dynamic change that we have in any economy… anywhere in the world,’ says Karabell. “It is fueling commerce, it is fueling connectivity….it is facilitating whatever is working in the world that we’re in.”

Companies “will continue to spend hugely on technology because it makes them more efficient,” says Karabell. “You and I are going to keep buying that next cell phone, that next device that allows us to be more connected from $50 phones to $500 phones.”

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Karabell admits the prevalence of technology won’t reward all equally, less labor is needed to make these products. “It’s highly detrimental to the 20th century mold of the working man, doing things and making stuff,” he says. But Karabell assures that those with skills related to “information, innovation and entrepreneurship” will benefit.

His favorite tech picks: Google (GOOG) and Amazon (AMZN).

“Google continues to move the needle as a central hub of technology,” says Karabell. As for Amazon, he loves “the fact that Amazon runs its business so contrary to the way Wall Street thinks it should run its business."

Amazon shares closed Wednesday slightly higher at $266.56, leaving the stock 3.6% higher year-to-date.

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