Technology Regains Momentum: 5 ETFs Leading The Way

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After witnessing wild swings for a month, the technology sector regained momentum last week on enthusiasm over rapid economic growth. This is especially true given that the ultra-popular tech ETF — Select Sector SPDR Technology ETF (XLK - Free Report) — has gained 4.2% in a week compared to the gains of 2.6% for the broad market fund SPDR S&P 500 ETF Trust (SPY - Free Report).

The combination of rapid COVID-19 vaccinations, progress on vaccines, and an unprecedented stimulus has been bolstering investors’ confidence. Additionally, the latest bouts of data suggest good times ahead for the economy. A measure of U.S. manufacturing activity soared to its highest level in more than 37 years in March, driven by strong growth in new orders. Meanwhile, the United States added 916,000 jobs – the fastest pace since August last year and the unemployment rate fell to a pandemic low of 6%.

Americans are growing more confident about the economy given that the University of Michigan’s final sentiment index climbed to a pandemic high of 84.9 in late March from a preliminary reading of 83. The Conference Board on consumer confidence index also jumped to 109.7 in March — the highest level since the onset of the pandemic in March 2020. Additionally, the International Monetary Fund upgraded its global growth forecast from 5.5% to 6% for this year, largely reflecting the quick recovery in the U.S. economy.

Further, the surge in Treasury yields has moderated, rekindling investors’ interest in the tech sector. In the latest minutes, the Fed reaffirmed its accommodative stance maintaining rates near zero through at least through 2023.

Moreover, the sector outlook remains solid given the global digital shift even in the post-COVID world with the acceleration in e-commerce for everything, ranging from remote working to entertainment and shopping. The rapid adoption of cloud computing, big data, Internet of Things, wearables, VR headsets, drones, virtual reality, artificial intelligence, machine learning, digital communication, and 5G technology will continue to drive the sector higher.

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