Technology stocks outperformed the stock market this year. Some massive trends should continue firing up the tech sector in 2016 and beyond.
The Technology Select Sector SPDR exchange-traded fund (XLK) and Vanguard Information Technology ETF (VGT) — the two largest tech ETFs — both returned about 3% in this year while the SPDR S&P 500 ETF (SPY) lost 0.7%, according to Morningstar. The biggest drivers in both ETFs were Microsoft (MSFT), +19% gain year to date; Facebook (FB), +33%; and Alphabet (GOOGL), +43%. Apple (AAPL), the biggest holding in both ETFs, shed 2%.
A part of the tech sector’s earnings growth can be attributed to share buybacks. Repurchases reduce the number of shares outstanding over which earnings are divided, thereby increasing earnings per share.