Daniel T. Fink
Assistant Vice President,
Marketing and Client Service
Well, that was a surprise! Tech, which has long been the darling of our current bull market, has had a series of unexpected misses in recent months. Some of this is entirely understandable. Market saturation is a real concern and ability to scale appears to be both a blessing and a curse. Companies with “subscription” based participation models are running face (no pun intended) first into this headwind and are obviously grappling with this issue right now.
The charts below should bring some clarity as to why underperformance with this particular group could be potentially problematic.
What these charts illustrate is just how dependent the broader market has been on the over performance from Tech. What happens when these giants run out of room to grow? This is rarified territory for investors, and some are getting nervous. While Tech has been responsible for virtually all of the S&P 500’s total return this year, there are still other sectors that do outperform. Actively managing this potential risk is essential and offers the opportunity to minimize unnecessary exposure to Tech, i.e. beta in this market, while still retaining meaningful allocation to other sectors with the greatest potential for alpha.
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