Cracks in the tech rally?

As the stock market has roared ahead, there’s been some concern about the outsized returns of a small number of asset classes, especially technology stocks.

Most fixed-income securities trade above par with yields scarcely above riskless treasuries.

So there’s not much value there, in my view.

Tech Titans

In equities, ETFs are all the rage and a greater percentage of the returns from the passive products are coming from a handful of tech companies.

That’s right, I’m referring to those famous FAANG plays, which I define as Facebook (FB), Apple (AAPL), Amazon (AMZN), Netflix (NFLX) and Google (GOOGL).

In my opinion, you should also include Microsoft (MSFT) and Tesla (TSLA).

Cold Water

So, when a powerful Wall Street player like Goldman Sachs (GS) says that the tech rally is overdone, investors take notice.

That’s what happened last week when investors dumped tech stocks and rotated capital into unloved sectors like banks and energy.

In my opinion, many investors are not well positioned for this potential sector shift should it become permanent.

Turning Point?

Looking ahead, two key questions confront investors heading into the second half of 2017. First, have we seen a huge turning point in the tech rally?If not, will the conventional wisdom of staying with the market leaders be confirmed?

Photo Credit: sabin paul croce via Flickr Creative Commons

The post Cracks in the tech rally? appeared first on Smarter InvestingCovestor Ltd. is a registered investment advisor. Covestor licenses investment strategies from its Model Managers to establish investment models. The commentary here is provided as general and impersonal information and should not be construed as recommendations or advice. Information from Model Managers and third-party sources deemed to be reliable but not guaranteed. Past performance is no guarantee of future results. Transaction histories for Covestor models available upon request. Additional important disclosures available at