The technology sector has managed to impress investors in this pandemic-stricken year. The Dow Jones U.S. Technology Index has managed to return 43.5% in the year-to-date period in comparison to the Dow Jones U.S. Index’s 16.5% gain. Going on, the tech-heavy Nasdaq Composite Index hit an all-time high on Dec 7.
The numbers highlight the fact that some major-technology players have shown resilience to the coronavirus outbreak-led economic slowdown. These also highlight the important role that technology is playing with respect to helping people maintain social-distancing norms.
The aggravating coronavirus outbreak resulted in Americans spending more time indoors and opting for in-house entertainment modes. Moreover, surging work-from-home and online shopping trends, increasing digital payments, growing video streaming and soaring video game sales have been observed in the pandemic times.
Keeping up with these new trends, a few major technology stocks have been gaining traction from the buoyancy in demand for their products and services. Evidently, cloud computing has emerged as a key technology in the fight against COVID-19. It is assisting organizations in remotely processing a lot of information, developing and running key applications and services, and helping employees across the world collaborate while working. The work-from-home model too has bumped up the sales of PCs, laptops and other kind of computer peripherals.
Apart from this, an increasing number of people are now resorting to streaming platforms like Netflix, Amazon Prime or Disney+ or turning to social media platforms like Facebook and Twitter for in-house entertainment.
Going on, the current environment marked by the worsening coronavirus outbreak, as the total number of cases in the United States has crossed the grim mark of 15 million, presents a favorable case for the technology stocks in the days to come. The surging number of coronavirus cases has prompted some states and cities to re-impose stricter social-distancing measures to curb the outbreak. This can increase investors’ inclination toward e-commerce and other technology stocks.
Per the COVID Tracking Project, more than 104,600 coronavirus-infected patients (the highest figure of the pandemic) were in hospitals in the United States on Dec 8, as mentioned in a CNN report. Heightening the concerns, health experts have warned about the chances of the situation to worsen further, led by the December holiday gatherings, along with rising cases from Thanksgiving week (per a CNN report).
Notably, two front-runners in the coronavirus vaccine race, Moderna (MRNA) and Pfizer (PFE)/BioNTech, have applied to the FDA for emergency-use authorization for their coronavirus vaccines. Markedly, the FDA is supposed to meet its Vaccines and Related Biological Products Advisory Committee on Dec 10 to review Pfizer's application and on Dec 17 to evaluate Moderna's application, going by a CNN report.
It is important to note here that distribution of coronavirus vaccines could start within weeks, pending authorization from the FDA, per the U.S. Health and Human Services Secretary Alex Azar (according to a CNN report). However, it shall be June 2021 by when all Americans (who want a vaccine) will get vaccinated, according to an official with the White House vaccine initiative, per the report mentioned above. This gives enough time to technology stocks to gain from the pandemic-driven demand.
Technology ETFs to Consider
A divided Congress where Republicans can continue to control the Senate and Democrats the House is also adding to the optimism. As a result of this political gridlock, it will be a daunting task to implement major and stringent changes in the existing policies and the corporate tax policies, at least in the near term. Moreover, experts believe that the technology sector might get a more conducive environment under the President-elect Biden’s administration. Thus, investors seeking to ride the big tech rally could consider the following ETFs:
Vanguard Information Technology ETF ( VGT Quick Quote VGT - Free Report)
The fund seeks to track the performance of the MSCI US Investable Market Information Technology 25/50 Index. It has an AUM of $39.59 billion. It charges investors 10 basis points (bps) in annual fees. The fund currently sports a Zacks ETF Rank #1 (Strong Buy), with a Medium-risk outlook (read:
Apple Beats Fiscal Q4, iPhone Sales Drop: ETFs in Focus). The Technology Select Sector SPDR Fund ( XLK Quick Quote XLK - Free Report)
The fund seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the Technology Select Sector Index. It has an AUM of $36.67 billion. It charges investors 13 bps in annual fees. The fund presently flaunts a Zacks ETF Rank of 1, with a Medium-risk outlook (read:
Online Holiday Shopping Hit Records: ETFs to Win & Lose). iShares U.S. Technology ETF ( IYW Quick Quote IYW - Free Report)
The fund seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the Dow Jones U.S. Technology Capped Index. It has an AUM of $6.54 billion. It charges investors 43 bps in annual fees as stated in the prospectus. The fund sports a Zacks ETF Rank #1 currently, with a Medium-risk outlook (read:
ETFs to Buy as Cloud Boosts Microsoft's Fiscal Q1 Results). Fidelity MSCI Information Technology Index ETF ( FTEC Quick Quote FTEC - Free Report)
The fund seeks to provide investment returns that correspond, before fees and expenses, generally to the performance of the MSCI USA IMI Information Technology Index. It has an AUM of $4.96 billion. It charges investors 8 bps in annual fees. The fund also flaunts a Zacks ETF Rank #1 at present, with a Medium-risk outlook.
iShares Expanded Tech-Software Sector ETF ( IGV Quick Quote IGV - Free Report)
This ETF provides exposure to software companies in the technology and communication services sectors by tracking the S&P North American Expanded Technology Software Index. It is popular with an AUM of $5.69 billion. The product charges 46 bps in annual fees and sports a Zacks ETF Rank of 1, with a High-risk outlook.
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