Technology shares have come under pressure in recent weeks as investors continue to question the timescale of the major technology companies monetising their enormous investments in data centres. However, this has not yet fully impacted investor sentiment, with fund managers remaining ‘risk-on’ (overweight equities, low cash levels).
This can be seen in the chart above, which shows the performance of the Magnificent 7 – that is, the major US tech stocks – and the remaining 493 stocks in the S&P 500 Index. We refer to this sub-index as the S&P 493. The performance is shown here in Sterling, with dividends reinvested, from the start of the year.
The Magnificent 7 are trading close to the 100 mark. Viewed since the start of the year, they have been extremely volatile but the combined return has been close to 0%. By contrast, the remaining 493 stocks have, on the whole, gained around 15% over the same period. And this shows precisely that the market is currently broadly supported: many investors feared that a price correction in the technology sector could become a problem for the broader market. However, that was not the case.
Investors have therefore not turned their backs on the stock market, but have instead shifted their investments into other, more traditional sectors. Incidentally, the UK is (to a certain extent) also benefiting from this: the FTSE 100 has delivered a performance of 8% since the start of the year thanks to energy, defence, financials and industrials.
This content is for general information purposes only and does not constitute financial advice or a personal recommendation. Past performance is not a reliable indicator of future results. Investments can rise or fall in value, and you may receive less than you originally invested.
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