The underperformance of technology stocks this year continues to hurt investors who haven't been paying attention to the sector rotation. Things haven't been getting better for tech, they've only been getting worse, advises JC Parets, founder of AllStarCharts.
With record returns for stocks in Q3, for example, large-cap technology was actually down last quarter. Small-cap technology is somehow still down for the entire year! The struggle is real.
But all the major indexes keep hitting new all-time highs every month. We just hosted our LIVE monthly charts conference call and we spent most of the time looking at sectors and stocks outside of tech that we've been buying and are looking to own more of.
Buying lines that are going down is not historically a good strategy to make money in the market. In this chart below, you can see the Technology Select Sector SPDR ETF (XLK) still outperforming the S&P 500 ETF Trust (SPY) going into the end of last year, while the PowerShares S&P SmallCap Information Technology ETF (PSCT) was already rolling over hard.
That small-cap tech underperformance has continued throughout 2024, and the large-cap tech stocks have been following along accordingly.
Think about this. Technology is massively underperforming the rest of the small-cap universe, despite being one of the largest weightings. Meanwhile, tech is also underperforming the rest of the S&P500, despite being the largest weighting by a long shot. Tech even made new 52-week lows last month relative to the Nasdaq, just to put things in perspective.
But despite all of that, the S&P 500 on both a market-cap weighted basis and equally weighted basis closed the month at the highest levels ever. Same thing with the Nasdaq 100. Highest monthly close ever on both a market-cap weighted and equally weighted basis.
It's a bull market. It's just that technology hasn't been the way to profit the most from this period.
We recently discussed the top biotech trades we're putting on this month. We walked through each of the consumer discretionary stocks that are breaking out. And there are even three energy plays that are a “go” right now.
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