This article was originally published on ETFTrends.com.
The technology sector has experienced some twists and turns after the volatility earlier this year, fears of a trade war smothering global growth and political uncertainty. However, ETFs still favor the tech segment.
Over the third quarter through Thursday, the S&P 500 and Dow Jones Industrial Average rose 2.9% and 0.5%, respectively, while the Nasdaq advanced 6.2%.
“A lot of the investing public is piling into the same things,” Jim Paulsen, chief market strategist at Leuthold Group, told the Wall Street Journal. “There’s a lot of sheep following one another.”
4 Tech ETFs Add Billions in Inflows
As investors continue to chase after growth, technology-related ETFs continued to attract heavy inflows over the second quarter. For instance, the PowerShares QQQ ETF (QQQ) remained one of the most popular ETF plays over the past three months, attracting $2.1 billion in net inflows, according to XTF data.
Additionally, the Vanguard Information Technology ETF (VGT) saw $1.2 billion in net inflows, First Trust Dow Jones Internet Index Fund (FDN) added $817.7 million and iShares North American Tech-Software ETF (IGV) brought in $377.0 million in over the second quarter.
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.
“Long term, it looks like a legit growth story,” Paul Christopher, head of global market strategy for Wells Fargo Investment Institute, told the WSJ.
However, investors should be aware that tech companies in the S&P 500 have the highest share of overseas revenue of the broad index's 11 sectors. According to FactSet and BofA Merrill Lynch data, tech companies have a foreign exposure level of about 59%, compared to the broader S&P 500's one-third exposure from foreign revenue streams and indirect exposure via commodities.
For more information on the tech sector, visit our technology category.
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