Tech Stocks Just Did Something That Should Only Happen Once Every 4 Million Years
The tech sector outperformed the S&P 500 at an anomalous pace this spring.
Tech Stocks Just Did Something That Should Only Happen Once Every 4 Million Years
Overview
Tech stocks recently made a move that statistically should be extremely rare, according to the Carson Group. The S&P 500 Information Technology Sector index, which can be bought through the State Street Technology Select Sector SPDR ETF (NYSEMKT: XLK), outperformed the S&P 500 index, which can be owned through exchange-traded funds (ETFs) like the Vanguard S&P 500 ETF (NYSEMKT: VOO) -- by 29.7% over a 50-day trading period. That was six standard deviations above normal, making it what's called a "six-sigma" event. It's a statistical anomaly that mathematically should only happen once every 4 million years, although tends to happen more frequently in markets than normal distribution math suggests.
What makes this move even more extraordinary is that a large percentage of the S&P 500 already consists of large-cap tech stocks. About 35% of the broader index is in the tech sector, and its three top holdings are Nvidia (NASDAQ: NVDA), Apple, and Microsoft, which are the same top three holdings as those in the technology index.
Details
Where the outperformance comes from is the tech index's 47% weighting toward semiconductor stocks, which has been a hot sector; its top ten holdings also included Micron Technology, AMD, Broadcom, and Intel. Over 22% of its portfolio also consists of software stocks, which, after being very beaten down, also saw a nice spring rally.
Source
Originally published at www.fool.com.
