Below I show the very popular Technology SPDR (XLK), both absolute and relative performance:
Another way of viewing the tech sector -- or any sector for that matter -- is my preferred method, by using an equal-weighted ETF as opposed to market-weighted. The XLK is market-weighted meaning it's a top-heavy representation with larger-cap stocks having a greater influence on the ETF's return. An example of an equal-weighted sector representation is RYT, the Guggenheim Equal-Weight Technology ETF. The two ETFs have a similar number of holdings, the XLK with 77 stocks and the RYT with 71. However, as shown below, the top-10 stocks in the XLK comprise a whopping 63% of its weight, compared to the RYT with its top-10 holdings making up just 18% of its weight.
The RYT being equal-weighted is a much flatter surrogate and in my opinion offers a truer depiction of how the entire tech sector is performing.
Below I show the relative return (vs. S&P 500) of both the XLK and RYT.
As with the absolute vs. relative charts for the XLK, the relative return charts above are quite different. We've already discussed the relative return of the XLK (upper inset), with its multi-month downtrend recently broken to the upside. Yet consider the relative return of the RYT (lower inset), making a double-bottom last year, successfully breaking through its declining trend line last December, remaining in a solid uptrend and breaking out last month.
So again, how have tech stocks been doing? Based on the XLK, up until the last few weeks, relative performance vs. the S&P 500 has been very poor for months. However, when considering the RYT, relative returns have been much better, with a low put in last November and a rising trend established since that time. All in all, I would say tech stocks have overall been performing quite nicely and prospects continue to look bullish.