Tech stocks are August’s winners thanks to Apple
Investor enthusiasm ahead of the launch of the new iPhone lifted Apple shares to a new record high, and helped make technology the best performing sector of the US market in August.
The upswing marked a sharp turnround from earlier in the month, when the sector had been weakened by bouts of profit-taking, especially for the so-called FAANG stocks — Facebook, Amazon, Apple, Netflix and Alphabet, which was formerly known as Google. The sector has led the market this year with a gain of more than a fifth.
The renewed buying also pushed the Nasdaq Composite to a fresh closing high on Thursday.
Investors attributed the gains of recent days to various factors, including a spillover of momentum from Apple shares, which have jumped on news that the new iPhone will be unveiled on September 12. Its stock added more than 10 per cent in August.
For some investors, the interest in tech was a case of FOMO — fear of missing out.
“If tech is the gainer, I don’t want to be the loser,” explained JJ Kinahan, chief market strategist at TD Ameritrade. “I don’t want to miss an up move on these stocks.”
One catalyst on Thursday, Mr Kinahan said, was word that the Trump administration plans to release a more detailed tax plain in the next few weeks, according to an interview with Steven Mnuchin, US Treasury secretary, in the Wall Street Journal.
“If the hunch is that there is going to be something in that tax plan about repatriating money [held by US companies overseas], that sector [tech] will benefit most,” Mr Kinahan said.
Others pointed to a return of the “risk on” trade, a reversal of a move by investors this month to what are perceived as stable, dividend-paying areas, such as utilities. As recently as a few days ago, utilities shares were on track to be the top monthly performer in the S&P 500 for the first time since September of 2015.
“It was ‘risk off’, then we saw a re-risking in the last few days,” said Michael Underhill, chief investment officer at Capital Innovations. “Apple, Facebook — those are the go-to names in the risk-on mentality.”
Mr Underhill also said that concern about the negative effect of Hurricane Harvey on US economic growth has driven investors back to tech, which offers the hope of growth regardless of the underlying economy.
Tech also benefits from growth outside the US.
“It has to do with making up lost ground, strong earnings growth and it is the most internationally exposed place to be,” said Burns McKinney, a portfolio manager with Allianz Global Investors. “You have had European growth that has been solid, China has actually had good GDP numbers and . . . Japan posting 4 per cent GDP growth.”