ARE TECHNOLOGY STOCKS EVER GOING TO FALL?

It's no secret that the technology industry has outpaced its competitors in energy and finance, but the magnitude of this disparity is staggering. In 2020, technology beat energy by more than 60%, greatly above the usual yearly push and pull between both industries of +/-26 percent since 2000. And the year isn't even halfway through.

History of Sector Rotation

The previous decade has seen a constant bull market for stock indices as a whole, but the sector breakdown for energy offers a different narrative. Since 2010, oil and gas firms have struggled to break out of their flat line, and they've witnessed a recent wave of selling this year as technology stocks continue to hit new highs.

The decade before that, on the other hand, reveals a different narrative. From 2000 to 2010, the energy industry outperformed the IT sector by hundreds of points. Prior to the financial crisis of 2008, the energy industry resembled the technology sector today. So, how will the following ten years unfold?

Planning for the Future

Since sectors rotate in and out of fashion often, most investors combat potential shake ups by diversifying across all sectors. Unfortunately, major equity futures such as the S&P 500 (/ES) and Nasdaq (/NQ) are now heavily invested in the technology sector, 24% and 45% weightings respectively. Small Stocks 75 (/SM75) offers near-equal exposure in tech, materials, industrials, financials, and energy allowing traders to both reduce risk of a concentrated portfolio and avoid missing out on the next trend.