Benzinga and Yahoo Finance LLC may earn commission or revenue on some items through the links below.
Despite the rampant market volatility, the technology sector has long delivered superior returns compared to the broader market equities. The Technology Select Sector SPDR Fund (NYSE:XLK) has outpaced the S&P 500 over the past year, boasting an impressive 31.2% return compared to the S&P 500 index’s 28%.
Tech stocks have long been hailed as the champions of the stock market, with the Magnificent Seven stocks delivering stellar yet consistent performance. For instance, shares of Meta Platforms, Inc. (NASDAQ:META) are up over 88% over the past year, while the AI-pioneer NVIDIA Corporation (NASDAQ:NVDA) stock has surged by over 210% over this period.
The generative AI boom has continued to create a buzz, with Big Tech companies aggressively incorporating AI into their products and services to stay ahead in a market projected to exceed $1 trillion in revenue within the next decade.
Tech’s Lackluster Performance as Headwinds Pile On
While the long-term performance of tech stocks has been spectacular, the increasing economic turmoil has caused them to lose their spark. The Technology Select Sector SPDR Fund’s
Over the past month, the tech sector fund saw a decline of 5.82%, mirroring the broader tech market’s struggles, as the S&P 500 gained 5.2%. Over the three-month period, XLK slipped by 0.55% while the S&P 500 advanced by 4.4%.
Tech giants are currently dealing with significant upheaval, causing their stocks to underperform despite posting better-than-expected earnings. Alphabet Inc. (NASDAQ:GOOG) is currently in the middle of a major restructuring, while Meta Platform predicts a slowing growth trajectory in the upcoming quarters, causing its shares to drop by about 3% over the past three months.
Tesla Inc. (NASDAQ:TSLA) is dealing with mass layoffs, price cuts and disappointing earnings results as the company reported the largest year-over-year revenue decline since 2012 for the first quarter of 2024.
Persistent Inflation Woes
The tenacious inflation rates and delayed rate cuts have also caused investors to pull out of tech stocks lately. The release of the Federal Open Market Committee (FOMC) minutes from their April 30 to May 1 policy meeting added to the market’s jitters, as it revealed a stark lack of progress in recent months toward curbing inflation.
“Participants observed that while inflation had eased over the past year, in recent months, there had been a lack of further progress toward the Committee’s 2% objective,” the summary concluded, “The recent monthly data had showed significant increases in components of both goods and services price inflation.”
Optimism Amidst Volatility
Despite the recent sell-off, some analysts remain bullish on Big Tech. Barclays, for instance, continues to have a positive outlook on the sector.
“Big Tech fundamentals still look good here, and we think there’s room to run over the next couple of quarters, even though the bar for the group to deliver has been set very high. Big Tech revisions have strengthened further post-Q1 earnings, bifurcating even more from the rest of the S&P 500,” said Venu Krishna, strategist at Barclays.
Furthermore, NVIDIA Corp’s strong earnings report took the market by storm, as shares of the AI-chipmaker crossed $1,000 for the first time on May 22. The company’s better-than-expected first-quarter earnings report, coupled with its 10-for-1 stock split announcement, has taken the market by storm, driving the Nasdaq Composite to hit a fresh high on May 23.
Add a Little Stability to Your Portfolio
While some analysts believe tech stocks still have room to grow, others speculate that a major correction could be in the near future. Diversifying your portfolio with income generating assets can help you weather a market downturn by providing consistent cashflow regardless of which direction stocks are heading. One extremely popular option right now is private credit, particularly private credit backed by real estate. Two trusted options are the Arrived Private Credit Fund and Basecamp Alpine Notes.
The Arrived Private Credit Fund simplifies investing in short-term financing for real estate projects, providing attractive yields secured by quality residential real estate. With target annualized dividends of 7-9%, quarterly liquidity, and a diversified pool of real estate-backed loans, this fund is an excellent complement to equity investing.
Click here to learn more about the Arrived Private Credit Fund.
Basecamp Alpine Notes from EquityMultiple offer another powerful short-term cash management tool, with a target APY of 9.00% over a 3-month term and a minimum investment of only $1,000. These notes provide high liquidity and compelling rates with compounding interest, making them an ideal choice for investors looking to build their income-generating portfolio. As a special offer, Basecamp Alpine Notes are exclusive to first-time investors on the EquityMultiple platform, giving new investors a unique opportunity to take advantage of these favorable terms.
Click here for more details about Basecamp Alpine Notes.
Read Next:
This article Technology Select Sector SPDR Fund’s Time to Shine: Beating the S&P, But for How Long? originally appeared on Benzinga.com
