Halfway through 2019, tech leads Wall Street
Technology stocks are Wall Street's top performers as 2019 hits half-way, with investors betting on lower interest rates, although Apple and chipmakers face turbulence related to the U.S.-China trade war.
The S&P 500 information technology index has surged 9% in June, its strongest month in three years. That rally, and the S&P 500's record high on June 21, reflect investors' increased appetite for risk as they become more confident the Federal Reserve will cut interest rates to support a slowing economy.
It also shows that Wall Street is mostly confident that U.S. President Donald Trump, who has shown a dislike for stock market downswings, will ultimately resolve his trade conflict with China.
Investors were looking for signs of progress from the G20 meeting in Japan, where the United States and China agreed on Saturday to restart trade talks after Trump offered concessions, including no new tariffs and an easing of restrictions on tech company Huawei , in order to reduce tensions with Beijing.
After meeting with Chinese President Xi Jinping at the G20 summit in Osaka, Trump called his talks with Xi "excellent."
"The risk to the downside is the greatest. If trade talks break down then we could head lower, probably a lot further, and the tech sector could be a leader to the downside," said Randy Frederick, Vice President of Trading & Derivatives at Charles Schwab.
Other investors say their optimism about the tech stocks is grounded in expectations that the sector's earnings growth will outperform the rest of the economy over the next several years.
David Carter, chief investment officer at Lenox Wealth Advisors in New York, had said going into the meeting that their expectations for genuine progress on tariffs at the G20 were low. "Tech is less of a short-term tactical play, and more a belief in the long-term growth potential of the space. Certainly, it's affected by tariffs and regulation, but the growth story is still there."