Written By: Stephen Fauer, CFA
Most people love tech, even if they don’t fully understand it. It consists of cutting-edge stuff and represents our hopes for the future. We’re talking about companies that participate in social media, software, semiconductors, computer and communications equipment, internet services, and the like.
In general, tech stocks have performed spectacularly well over the last few years, with their performance dominating stock returns. While these companies have a significant impact on the economy, their representation in the stock market has become somewhat outsized. Using a broad definition of “technology,” that sector accounts for just under 40 percent of the Standard & Poor’s 500 (“S&P” or “index”). The six largest S&P companies are all tech companies: Apple, Microsoft, Amazon, Tesla, Alphabet (Google’s stocks consisting of two classes), and Facebook account for about 24 percent of the index. The weighted average return of these stocks as of mid-February 2021 was 78 percent over the past 12 months.
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