A Deep Dive into the Industry Groups of the Technology Sector

Technology stocks got crushed at the end of last year. The ETF that tracks the Technology Sector ($XLK) fell over 17% in Q4 2018. The sector is now up about 5% so far in 2019 and sits a hair above its 50-day moving average. Analysts have been talking about Technology a lot recently. It represents a large weighting of the S&P 500 and often leads the overall market higher or lower.

Bespoke Investment Group is a boutique research firm that puts out great technical insights on the market. They wrote a short note out this morning, examining the industry groups of the Technology sector in order to find insights as to how the group might perform in the months ahead. They found that so far in 2019, a majority of the gains have come from the industry groups and components of the Technology sector that don’t normally lead the sector.

Above is a matrix of the industry groups of the S&P 500 that they analyzed. They explain:

Technology has so far put in a decent performance in 2019 which is important given that it still makes up nearly 20% of the S&P 500.  What is interesting, though, is that the leadership hasn’t necessarily come from the areas of the sector that would normally first come to mind.

You can see that industry groups like Technology Hardware have continued to underperform there peers this year. It’s also interesting to take a look at the individual stocks. You’ll notice, HP, IBM, and Texas Instruments are massively outperforming the more growth names like Apple, Microsoft, and Intel.

They don’t make a hard call on whether or not this information is bullish or bearish. However, the key takeaway from the note is the change in leadership that they’re currently seeing in the industry groups of the Technology sector. You can read the entire note from Bespoke here.