Outlook for Tech ETFs in 2017
2016 was a turbulent year for the stock market. Brexit, and an increasingly toxic US election campaign, caused no end of highs and lows as end endless stream of positive and negative news reports sent the markets into a spin. We saw bull markets, bear markets, and everything in between.
A Promising Outlook for 2017
For the remainder of 2017, the outlook is promising. Most senior analysts forecast a bull market will continue, with many predicting a return to earnings growth as President Elect Donald Trump implements policies to cut taxes and help America’s business sector return to profitability. For tech ETF’s, the outlook is positive.
Tax Cuts and Reduced Regulation
Trump’s promises to curb excessive regulation have boosted share prices in the tech sector. The US Federal Reserve is dragging its heels on raising interest rates, but with inflation creeping up, it seems likely that Janet Yellen will tighten the Federal Reserve’s monetary belt before the end of 2017. Despite this, most senior analysts believe Trump’s pro-growth policies and a new US administration will herald a year of strong performance in the stock markets.
Technology stocks and shares are very sensitive to economic fluctuation. Tax cuts and reduced regulation eases the burden on US corporations, which is likely to benefit the tech sector. President Trump has proposed a reduced tax rate of 10% on money banked overseas. This tax break on the repatriation of money from overseas ventures will help tech firms, Apple and Intel in particular. Tax policy changes will lead to more dividend payments for investors. Smaller tech firms are likely to benefit from the domestic growth over the next year, both in the US and the UK.
Top Tech ETFs Enjoy Strong Growth
Top tech ETFs, AAPL and NVDA, have both enjoyed a strong performance of late. The $14.5 billion XLK ETF also hit a 52-week high before dropping slightly. Other top performing ETFs, GOOGL, VGT and FB have all got off to a promising start this year, with every indication that this strong performance will continue.
Some analysts are, however, urging investors to exercise caution. The smart device revolution has really taken off in the last couple of years, with a number of major companies gaining serious momentum on the stock market. NVIDIA has seen its shares triple in value over the last twelve months, in part thanks to ground-breaking work developing graphical processing units in data analysis applications. However, smaller firms tend to shoulder more of the risk in this cutting edge field, so it is sensible to look at tech ETFs that offer a more diversified exposure to the sector. PSI is a good example, as its managers regularly shake up the composition according to new and merging innovations in the industry.
ETFs are Popular with Millennial Investors
ETFs are proving popular with investors, particularly millennials. Financial spread betting companies offer a variety of financial options for them amongst other spread betting opportunities. ETFs offer diversification, liquidity, transparency, low costs and tax efficiency compared, and according to a survey carried out by BlackRock, ETF asset investment is unlikely to slow down in 2017. 25% of all investors use ETFs and 95% of financial advisors recommend ETFs to their clients. If you are new to ETFs, stick to funds with assets worth more than $10 million.
The bottom line is that tech ETFs are set to continue to grow in 2017, so this is a good year to get on board.