Technology, this year’s best-performing sector, hasn’t been this big in more than 17 years.
The sector makes up 25.1 percent of the S&P 500 as of Tuesday’s close, its highest weighting since November 2000 — a few months before the dotcom bubble burst — according to data from Bespoke Investment Group.
“It bears watching for sure,” Bespoke said in a note Wednesday. “A weighting of 25%+ is … nothing to sneeze at.”
Source: Bespoke Investment Group
Tech is up 8.4 percent in 2018 and has skyrocketed 35.7 percent over the past year, leaving all other sectors in the dust. Some of the best-performing stocks in the sector over the past year include Nvidia and Micron , both of which are up more than 100 percent in that period.
The sector’s high weighting may bring up unpleasant memories from when the dot-com bubble burst in the early 2000s, but Bespoke noted valuations for the sector are much lower now than they were back then.
“At current prices, the Tech sector’s forward [price to earnings ratio] stands at just 19.16,” Bespoke said. “At its peak in March 2000, the P/E ratio was 60.”
Bespoke also noted that tech’s latest move higher in weighting “has been much more slow and steady” than in the early 2000s.
Source: Fred Imbert CNBC