We’re in a bull market, and tech stocks are dominating it as we roar through the second half of 2017.
This year has already been a year that has posted new highs for the S&P 500. As of the writing of this article, the S&P sits at 2,506.38 which is over 100 points higher than it was just a few short months ago.
It’s up almost 10% since the beginning of the year.
By comparison, 2016 returned just a 2.7% overall increase.
Among all stock sectors, tech stocks lead the pace in growth. Investing in tech stocks is becoming one of the best ways to make money online.
So what’s happened to tech stocks in 2017 that’s caused such massive growth?
Let’s take a closer look.
Tech Stocks Pass Healthcare Stocks with the Help of Semiconductors
Healthcare stocks have recorded positive performance for the past 5 calendar years. However, in 2016 healthcare was the only sector that was down on the year.
Although it has begun to rebound in 2017, it still remains a relative uncertainty while we wait on the nation’s new healthcare policy.
Enter tech stocks.
Partially due to the obsession with Internet-enabled devices, semiconductor manufacturers have bolstered big earnings.
These hi-tech firms manufacture the tiny, complex chips that are used in all our smartphones and computing devices.
While semiconductor manufacturers suffered an earnings slump in early 2016, 2017 has been a very different story.
Five manufacturers in this industry rank among the 15 top-returning stocks in 2017.
This includes Lam Research LRCX at +0.14%. They grew their revenue by 39% in Q1 of 2017 and nearly tripled EPS in the past year alone.
Video Game Companies are Booming
The CEO of Activision Blizzard, Robert Kotick, says that the company’s Q1 revenue of $1.7 billion was due to the huge success of the 2016 release Overwatch.
That game has become the 8th billion-dollar game franchise in their portfolio.
Meanwhile, Electronic Arts fueled its revenue growth through robust digital sales.
The “Big 5” (Plus Netflix)
The “big 5” tech stocks, plus Netflix, have been fueling huge growth in the tech stocks sector.
The “big 5” include Alphabet (the parent company of Google), Apple, Amazon, Microsoft, and Facebook.
Let’s take a look at the YTD performance of each of the “big 5”, plus Netflix, as of the writing of this article.
- Alphabet +0.25%
- Apple +0.32%
- Amazon +0.34%
- Microsoft +0.14%
- Facebook +0.32%
- Netflix +0.32%
That averages out to a YTD performance among the “big 5” plus Netflix to +0.28%
Is the Market Too Narrow?
Investors worry that when the market becomes too narrow, it’s a sign of weakness for the overall market.
A typical conclusion is that when tech stocks succeed and the rest of the market is dull, investors must be making mistakes.
Will this lead to a similar market as the late 90’s when the dot-com boom came crashing down?
While that argument can certainly be made, there’s another possible explanation.
Maybe tech stocks aren’t on a bubble like they were in the dot-com era. Conversely, maybe they’re growing to new, healthy levels.
It’ll be interesting to see how tech stocks continue to perform for the rest of 2017.
What are your predictions?
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