As we live in a digital era, investing in tech stocks might seem a rather good idea. Let's find out how the tech market is performing today.
The creation of PCs, smartphones, tablets, cloud computing and e-commerce solutions are among the key developments that have reshaped our world in the last few decades. And it is rather impossible to imagine our future without having any of these advanced technologies.
Companies that were quick enough to seize the arising opportunity have come to dominate the list of the largest tech stocks in the world. While some of them have been around for decades, others have emerged only recently. These majors have managed to find their own niches, providing hundreds of millions of people all around the world with various types of hardware, software and services we use daily.
What is happening to tech stocks today?
August is typically a calm month for markets. But this year seems to be an exception to the norm. For the past two months, the market has been excited about a possible interest rate adjustment by the Fed, sending stocks off to the races. The biggest technology companies are driving a record run for major US indices, representing investor enthusiasm for the hottest stock sector.
Many expect the US central bank to cut the rates, despite stable GDP growth and a low unemployment rate. The Fed is planning to announce its latest decision on whether to adjust interest rates today, 31 July, following the conclusion of a two-day meeting. All investors are now waiting with bated breath to see how this event will affect the stock market.
So far this year, technology stocks have held their own. The S&P 500 Information Technology segment has climbed over 30% in the first half of 2019, making it the best-performing sector within the index with a large margin. In fact, it seems like the run may be far from over: many predict that the rally could continue even after the Fed’s decision. Lower interest rates usually tend to make borrowing cheaper for companies, which, in turn, helps business' bottom lines and boosts stock market performance.
US tech stocks climbed to new highs on 26 July after Alphabet and Twitter posted better-than-expected earnings. Apple also reported earnings for its June quarter on 30 July. These too were above predictions, allowing the stock to rise over 4% in after-hours trading. Furthermore, Microsoft, which represents around 20% of the S&P IT benchmark, reported a strong earnings beat. The company’s stock is up over 39% this year.
Moreover, shares of other majors, including Sprint and T-Mobile, jumped higher after the latter received conditional approval to purchase the rival carrier.
On 29 July, stocks fell slightly for both the S&P and Nasdaq indices. The next day’s pre-market trading was negative due to President Trump’s new comments regarding the probability of a trade truce with China.
However, it seems that nothing can bring technologies down. Regardless of the Department of Justice announcing its anti-trust investigations targeting big tech companies, the Nasdaq continued to hit a new all-time high.
While the US-China trade war seems far from over, placing the tech industry at a crossroads of both countries, the S&P tech sector also reached all-time records last week.
Tech stocks outlook: what the future holds
Evidencing the unrelenting march of technological progress has drawn many into forecasting the future of tech stocks.
Based on data provided by Kensho, a hedge fund analytics tool, the tech sector has gained between 20% and 40% in the first half of the year on just five other instances since 1990. After achieving these gains, the sector proceeded to trade positively through the rest of the year in every scenario, while tech stocks were adding over 24% of an average return during these periods. The S&P 500 also tended to perform well, gaining around 10% from August through December.
However, not all predictions are positive. John Stoltzfus from Oppenheimer Asset Management recently told CNBC that investors may want to fasten their seat belts, as uncertainty surrounding today’s market may cause a wave of near-term volatility: “Any kind of disappointment in a sense, okay, I can kind of take profits today without FOMO [fear of missing out] gripping my soul.” Stoltzfus believes that the ongoing trade war and the lack of its resolution are the biggest reasons holding back stocks from going even higher.
Mike Wilson, chief investment officer and chief US equity strategist at Morgan Stanley, wrote about the S&P 500 in a note to clients: “While our 2,400–3,000 call from 18 months ago may look vulnerable, we think this latest surge will fail again, as we don’t expect a Fed cut to rekindle growth the way market participants may be hoping, and now pricing.”
Additionally, what might become a real game-changer for the global tech market is the launch of China’s STAR market, showcasing some of the country’s most promising tech businesses. Trading of 25 listed companies began on 22 July. These stocks closed the first trading day with overwhelming gains, ranging from 85% to 400%. China plans to make its new market a strong rival to the Nasdaq, listing its tech IPOs on the STAR rather than on the US or Hong Kong exchanges.
As China and the US are locked in a prolonged trade war, which hurts the profits and sales of major tech companies on both sides, the STAR may become the next-big-thing many investors would want to put their cash into.
Are you expecting technology stocks to run into near-term trouble? What are your bets on tech stock forecasts?
Top tech stocks to watch
Taking into consideration overall instability and uncertainty of economics, it is rather difficult to predict which stocks may perform the best in the second half of 2019.
However, many of the US largest companies weighted by market capitalisation are those from technology sector, with a few valued at around $1 trillion. Therefore, those who invested in these tech giants at the right time have already enjoyed exceptional returns.
So, if you are looking for the trending tech stocks to invest in, here is a list of the top 10 largest US tech companies, as of the end of June 2019:
You can stay up to date with the latest tech stocks 2019 news with Capital.com.