It isn’t a dream. Tech stocks are breaking out—and the gains can keep coming. – Crypto News – Crypto News
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It isn’t a dream. Tech stocks are breaking out—and the gains can keep coming. It isn’t a dream. Tech stocks are breaking out—and the gains can keep coming.

Technology

It isn’t a dream. Tech stocks are breaking out—and the gains can keep coming. – Crypto News

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1 year ago

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Tech investors must be pinching themselves right now.

It’s hard to believe the stocks have gone from the Grand Canyon of lows to the Mount Everest of highs in just a few months.

In late February, the S&P 500 Information Technology Sector Index hit a record close of $242. By early April, the index had plummeted 26% to a one-year low of $179.

The Trump tariffs came barreling on April 2. They hurt most sectors, but the drop was worse for tech because it’s more volatile than most sector.

Today, who would ever guess that the tech index was in the pits? It’s like there wasn’t even a selloff.

The index has gained 40% from its low to $251, a record high. And it’s back on its uptrend that started after a major bottom in late 2022. From then until now, the index has more than doubled.

Driving the recovery from April—and the three-year-long larger rally—are a few factors.

Earnings are one. The tech sector has had explosive earnings growth. Analysts are forecasting double-digit profit growth for the next several years because companies are still adopting artificial intelligence.

Tariffs are also less of a threat now. There’s still uncertainty, but less now that the White House has backed off some tariffs and made a few trade deals. That’s a major plus for chip makers, which rely on healthy demand from auto makers, manufacturers, electronics makers, gamers, and many other buyers.

And, because there are fewer and lower tariffs, inflation has stayed inside the lines. The market has cheered inflation that’s low enough for the Fed to keep interest rate cuts this year on the table. Cuts are a boon to the economy.

So, yes, the tech sector seems stable, and it has plenty of potential.

The S&P 500 tech sector went from a one-year low to a one-year high in 52 trading days, the second largest recovery ever, according to SentimenTrader. After tech hits a new one-year high just months after a one-year low, it averages an 18.5% rise for the following 12 months. It gains in the vast majority of instances.

Essentially, these instances come after the market has a quick scare, then recognizes it was just that—a scare—and nothing that will significantly damage earnings. That’s what’s happening now.

This time around, though, the market still must see whether the White House will reimplement the tariffs it put on hold, whether companies raise prices more, and whether inflation and rates move higher. But for the moment, there’s a relative sense of calm.

So maybe history will repeat itself. And there’s a good chance it will. Hang on to those tech stocks.

Write to Jacob Sonenshine at jacob.sonenshine@barrons.com

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