Technology not mastered both the S & P 500 since the dotcom bubble – UOL

(Bloomberg) – Technology companies are exerting more control over the US stock market than at any time since the Internet bubble

Spurred by three years of high where. Microsoft and Alphabet doubled in size, Amazon.com tripled and Facebook has become five times, the actions of computers and software have advanced to almost 21 percent of the value of the S & P 500 Index, near the peak in 15 years. The distance between the technology and the second largest group, the banks, is close to the highest in history.

Although this divergence arouse concerns anyone who has gone through the fall of 2000, the rise of technology companies has its virtues and, in some respects, it is a sign of health of the market. For example, it reflects the decline in influence of banks, which had a much larger share of the S & P 500 in the years prior to the financial crisis. It is also an indication of the reason: the technology is one of the only sectors where results continue to rise

“The underlying economy is moving more towards the technology, then it probably is not inconsistent that it encompasses a part. largest market, “said Brent Schutte, head of strategy at Milwaukee’s wealth management unit of Northwestern Mutual Life Insurance, which manages $ 89 billion. “I’m not saying the technology is cheap,” he said. “I’m excluding the notion that this is a bubble about to happen.”

Growth of earnings

Technology companies are extending their lead at the fastest pace in four years, and their representation in the S & P 500 rose more than 1 percentage point in the quarter, to 20.9 percent, about 5 percentage points above the financial stocks. Apple to Microsoft, the giants of the technology industry now occupy half of the top ten rankings of the USA’s most valuable companies, the same number as at the height of the Internet madness.

Unlike the era of dot com, as investors seized web companies with promises, but few earnings, current earnings are based on the results, driven by demand for products such as Apple’s iPhone and Google web advertisements. The strength of these companies could be observed in the season swings when they have the biggest beating in other sectors. Although the growth estimates of the S & P 500 in the third quarter have become negative, it is projected that earnings this group increase 2.8 percent

“This phenomenon is due to both companies. technology have a strong growth in terms of results as to which financial firms are leaving the scene, “said Rich Weiss, senior manager portfolio in Los Angeles of the American Century Investments, which manages about US $ 154 billion. “This growth is healthy. I do not think we need to worry about a bubble technology, now or soon.”