Investors are pleased with the latest Wall Street performance. The tech-heavy Nasdaq Composite again surged to another record closing high and rose 0.1% on Jun 24, after hitting a fresh intraday record the previous day.
It is observed that strong performances by some major tech players drove the index to an all-time high. Among the prominent players, Netflix (
NFLX Quick Quote NFLX - Free Report) inched up 0.8% and Facebook ( FB Quick Quote FB - Free Report) climbed 0.5%. Moving on, Tesla ( TSLA Quick Quote TSLA - Free Report) increased about 5.3% on the same day.
Despite the technology sector performing better in a low interest rate environment, it has displayed strength on the view that low interest rates will remain in place for at least more than a year. This should provide a boost to stocks. Notably, the Fed has signaled two rate hikes by the end of 2023 amid higher inflation. Going by a CNBC article, Fed Chairman Jerome Powell has however remained bullish on the economic recovery achieved so far from the pandemic-led slump. He also maintained that high inflation levels were temporary and will return to 2% over the long term, per the same article.
In this regard, Powell said that “Since we last met, the economy has shown sustained improvement. Widespread vaccinations have joined unprecedented monetary and fiscal policy actions in providing strong support to the recovery. Indicators of economic activity and employment have continued to strengthen, and real GDP this year appears to be on track to post its fastest rate of increase in decades,” as mentioned in a CNBC report.
Technology Sector to Remain Strong
Technology has played a major role in the ongoing health crisis. Telemedicine and Digital Health are receiving significant importance. In the present era, data management and storage become an integral aspect of healthcare. Moreover, the pandemic led to an increase in doctors opting for online consultations. Thus, with the growing technological advancements in the healthcare sector and the rising adoption of healthcare IT solutions as well as advantages of cloud usage healthcare, the cloud computing market is on a growth trajectory. The space is forecast to reach a worth of $64.7 billion by 2025 from $28.1 billion in 2020, seeing a CAGR of 18.1%, according to ReportsnReports.
Moving on, cloud computing emerged as a key technology and is keeping up with the growing work-from-home trend in the fight against coronavirus. It is supporting 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 bumped up sales of PCs, laptops and other kind of computer peripherals.
Certain ‘new normal’ trends also emerged amid the health crisis like work-from-home and online shopping, increasing digital payments, growing video streaming as well as soaring video game sales. The pandemic is also a boon for the e-commerce industry as people continue staying indoors and shopping online for all essentials, especially food items.
Further, the semiconductor space has been gaining from expanding digitization and growing dependency on the Internet owing to some new normal trends like online shopping, work from home, digital payments, digitization of healthcare, rising demand for video gaming and many more. In fact, growing adoption of cloud computing and the ongoing infusion of AI, machine learning and IoT are expected to keep the sector brewing with opportunities in 2021.
Technology ETFs to Bet on
All the factors discussed above highlight the instrumental role that technology plays amid the ongoing COVID-19 uncertainty in aiding people to maintain safe-distancing norms. Thus, investors 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 AUM of $45.97 billion. It charges investors 10 basis points (bps) in annual fees. The fund currently sports a Zacks ETF Rank #2 (Buy), with a Medium-risk outlook (read:
Time to Take a Bite Out of Apple? 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 with the price and yield performance of the Technology Select Sector Index. It has AUM of $41.18 billion. It charges investors 12 bps in annual fees. The fund presently flaunts a Zacks ETF Rank of 2, with a Medium-risk outlook (read:
4 Stocks to Buy as Nasdaq Hits Record High on Tech Rally). iShares U.S. Technology ETF ( IYW Quick Quote IYW - Free Report)
The fund seeks to provide investment results that before expenses correspond generally with the price and yield performance of the Dow Jones U.S. Technology Capped Index. It has AUM of $7.62 billion. It charges investors 43 bps in annual fees as stated in the prospectus. The fund currently sports a Zacks ETF Rank #2, with a Medium-risk outlook (read:
Tech ETFs Hit New Peaks Despite Hawkish Fed). First Trust NASDAQ-100-Technology Sector Index Fund ( QTEC Quick Quote QTEC - Free Report)
The fund seeks to replicate as closely as possible, before fees and expenses, the price and yield of the NASDAQ-100 Technology Sector Index. It has AUM of $3.42 billion. It charges investors 57 bps in annual fees. The fund also flaunts a Zacks ETF Rank #2 at present, with a High-risk outlook.
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