The Federal Reserve Bank of San Francisco’s Tech Pulse Index, which tracks the health of the U.S. information- technology industry, is showing an improvement in investment, consumption, employment, industrial production and shipments. The index rose for a 10th consecutive month to 81.84 in December, the highest since 2008.

Three Fed districts -- Philadelphia, Minneapolis and San Francisco -- cited “increased growth in information-technology services,” with San Francisco seeing “strong demand for cloud services,” according to the Jan. 15 Beige Book business survey.

Against this backdrop, sentiment about companies that make products ranging from networking equipment to mobile-phone components also is rebounding, Katz said. “Any incremental improvements in fundamentals could move the needle and start pushing stock prices up quickly.”

The shares are part of a broader transition, as investors move into industries that typically outperform benchmarks later in an economic expansion, according to Brian Jacobsen, who helps oversee $236 billion as chief portfolio strategist at Wells Fargo Advantage Funds in Menomonee Falls, Wisconsin.

55-Month Expansion

The current expansion began in June 2009, 55 months ago. The average since 1945 is 58.4 months, according to the National Bureau of Economic Research’s Business Cycle Dating Committee, which determines when recessions start and end.

That sentiment shift will benefit bigger tech businesses, because they have better fundamentals relative to the broader market, Jacobsen said. For example, the nine largest companies in the S&P 500 IT index -- which includes manufacturers as well as Google Inc. and Visa Inc. -- have a median return on equity of almost 23 percent, compared with about 14 percent for the benchmark index, Jacobsen said.

The tech index also is “more reasonably valued,” trading at about 15.5 times earnings now, below the 10-year historical price-to-earnings ratio of 16.4, Jacobsen said. He calculates the median for the S&P 500 is about 15.3, up from 14.1.

“Valuation and fundamentals will come together in the next three to six months to benefit large-cap tech stocks,” he said.

Index ‘Breakout’