|1st||Apple (12.03%)||Apple (24.40%)||Facebook A (22.65%)|
|2nd||Microsoft (11.74%)||Microsoft (20.57%)||Alphabet A (11.41%)|
|3rd||Amazon (10.47%)||Visa (4.39%)||
Alphabet C (11.15%)
Netflix (NASDAQ:NFLX) is the only big tech company missing from the list.
Here’s how I think of these three ETFs. QQQ is the “big kahuna” of the tech, combining all types of tech companies (the ETF’s next largest holdings are Facebook A and Alphabet A shares). The XLK and XLC divide the tech stocks along somewhat murky lines. Looking at the top three holdings, you might think that XLC is more of a free online oriented ETF (the website consumers use for “free”). But its top 10 holdings also include Comcast (NASDAQ:CMCSA), EA (NASDAQ:EA), and Disney (NYSE:DIS). Still, I prefer XLK/XLC split over QQQ for the simple reason that two ETFs mean a bit more diversification.
Regardless of how you divided the tech industry, its dominance harkens back to the late 1800s and the then power of railroads and other trusts (emphasis added):
A rally in technology stocks elevated the S&P 500 stock index to a record high on Tuesday even as the pandemic crushes the broader economy. The stocks of Apple, Amazon, Alphabet, Microsoft and Facebook, the five largest publicly traded companies in America, rose 37 percent in the first seven months this year, while all the other stocks in the S&P 500 fell a combined 6 percent, according to Credit Suisse.
Those five companies now constitute 20 percent of the stock market’s total worth, a level not seen from a single industry in at least 70 years. Apple’s stock market value, the highest of the bunch, reached $2 trillion on Wednesday – double what it was just 21 weeks ago.
Are we headed for a second-half slowdown? It looks like it. Consider the following excerpts from the latest Fed Minutes:
- Moreover, recent high-frequency indicators of spending on many consumer services – such as restaurant dining, hotel accommodations, and air travel – remained very subdued
- With regard to the behavior of household spending in recent weeks, participants pointed to information from District contacts and high-frequency indicators (such as credit and debit card transactions and mobility indicators based on cellphone location tracking) as suggesting that increases in some consumer expenditures had likely slowed in reaction to the further spread of the virus.
Consumer spending accounts for 70% of US economic activity.
Let’s take a look at today’s performance tables:
Notice that the long-end of the treasury curve is once again posting gains. The TLT was up .9% and the TLH gained .68%. As has been fairly consistent during the post-lockdown rally, the QQQ led the market higher; the OEF (S&P 100) was in the number three spot. Smaller-caps were down.
Tech and communication services were the two top-performing sectors, which explains why the QQQ was up. Rounding out the top three gainers is real estate. All other sectors were lower.
Small-caps are also trending modestly lower, printing a series of lower-lows.
However, micro-caps are holding their ground in the lower 95 area.
At the same time, there’s been a modest uptick in the treasury market:
The IEF formed a rounding bottom between August 11 and 14. It has been printing a series of higher lows since.
The TLT is in a modest uptrend that started on August 17.
The treasury rally could likely be a counter-rally to the recent sell-off. However, the small-cap weakness is modestly concerning as it shows that only large-caps are sending the market higher. Broader participation would signal a stronger rally.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.