Technology
Tech stocks represent roughly 22% of the S&P 500’s weighting and are the largest sector. The Technology Select Sector SPDR (XLK) has gained 31.4% since the start of the year and remains a top performer. The tech sector is generally more volatile compared to the broader market and its outperformance could be interpreted as a sign of strong risk appetite. And until we experience a sustained pullback like the dot-com bust from 2000-02, risk appetite will likely remain elevated.
Summary
"The most important single factor in shaping security markets is public psychology," said Gerald Loeb, a founding partner of E.F. Hutton & Co. While market indicators give us a peak at the public’s psychology, the performance of sector ETFs helps us understand that psychology just a little better.
Ron DeLegge is founder and chief portfolio strategist at ETFguide, and is the author of “Habits Of The Investing Greats.”