Equity market bulls have none other than technology stocks to thank for this year’s upside with the sector outperforming its counterparts by an average of 45%. Depending on the index you quote, however, tech stocks either led to exceptional gains or barely brought the index back to unchanged on the year.
Knowing how much of an index’s exposure is invested in technology is more important than ever as the sector continues to captivate the everyday trader, but it’s not as straightforward as you might think. For instance, AAPL and MSFT make up 12% of the S&P 500 and half of its technology sector weighting, and these same two names account for 24% of the Nasdaq.
High-flying biotech stocks, such as MRNA (up 260% in 2020), are greatly underrepresented in most stock ETFs and futures causing people to go elsewhere for their biotechnology exposure. Not to mention retail heaters like W, SHOP, and JD (up 270%, 175%, and 115% this year, respectively) that still don’t garner that much interest from traditional equity indexes.
Technology for Bulls and Bears
Small Technology 60 (STIX) simplifies things for the modern trader: 100% technology stocks with relatively equal exposure across tech companies in information, media, retail, and biotechnology. STIX gives roughly the same weighting to AAPL as it does MRNA, SHOP, and the rest of its components. Tech bulls can find potential upside in a product that lends greater equality to its stock names, while bears can take advantage of a more well-rounded technology trade that could fall harder if tides turn.