Should investors be worried as tech stocks record historic outflows?
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As the stock market hits record highs, equities in the technology space are exhibiting a concerning spike in selling activity. This concern is highlighted by the fact that tech stocks have seen outflows exceeding $4 billion over the past four weeks, according to Bank of America Global Research, marking the largest exodus since 2002. Technology stocks fund flows. Source: BofA Global Investment Strategy Analysis of the data shows that the tech sector fund flows follow a cyclical pattern, and capital outflow has typically coincided with market corrections. For instance, in 2008 and 2020, when there was notable outflow, the sector later saw a decline in stock prices. Therefore, the current trend could signal caution among investors, with the potential of a ‘rug pull’ scenario, where investors might face unexpected and sharp declines on the cards. Key tech stocks show weakness On the other hand, technology stocks, as tracked by the Technology Select Sector SPDR Fund (XLK), have struggled to sustain momentum, according to data shared by technical analyst Mark Newton in a post on X on November 9. Newton noted that key technology players like Apple (NASDAQ: AAPL) and Microsoft (NASDAQ: MSFT) have shown limited technical progress in recent sessions, signaling possible weakness in a sector that has been a significant driver of market growth in recent years. For instance, Apple, Microsoft, and Nvidia (NASDAQ: NVDA) ended the latest trading session down by 0.12%, 0.68%, and 0.84%, respectively. Technology Select Sector SPDR Fund analysis chart. Source: TradingView/Mark Newton It is worth noting that this weak performance in the technology sector coincided with a period when the S&P 500 index hit a new high above 6,000 for the first time in history. This rally was mainly fueled by Donald Trump’s re-election, whose proposed policies, such as corporate tax cuts, are considered…
Filed under: News - @ November 9, 2024 5:23 pm