Well, that didn’t last long.
Just days before technology stocks tumbled, relentless investor appetite caused the group to become the largest industry in the MSCI World Index for the first time since the dot-com bubble. For a fleeting moment, tech surpassed financial companies to become the biggest out of 11 groups in the index, occupying an 18 percent weighting.
Yet Monday’s selloff caused the sector to relinquish its crown, as the shares fell 2 percent to lead global stocks lower.
Tech had dominated inflows all year around the globe, with investors pouring $9.8 billion into the funds since December, according to a Bank of America note from last week citing EPFR Global Data, a pace that would put the total near $50 billion by year’s end.
The rout — initiated by Facebook Inc.’s data controversy and exacerbated by news about Apple Inc. and Uber Technologies Inc. — was arguably driven by company-specific events, rather than a fundamental reassessment of the sector. Regardless, such concentrated sector positioning and changes in the liquidity and growth cycle are casting doubts on whether the trade still has juice, said Tim Emmott, executive director at Olive Tree Financial Ltd. in London.
“It’s a growth/inflation playbook predicated on a steepening yield curve, but that’s a positioning play that I think is now being questioned,” Emmot said. “The market for me is already over its skis on the whole global growth trade.”