The plunge that pushed technology stocks to their worst quarter in a decade prompted exchange-traded fund investors to flee the sector at the second-fastest pace on record.
In all, they’ve pulled $5 billion from tech-focused ETFs since the start of October. That’s the biggest quarterly outflow since the $6 billion withdrawn during the period that ended in March 2016, according to data compiled by Bloomberg. About $3.5 billion was pulled in November alone, a month that saw huge declines in bellwethers including Apple Inc. and Nvidia Corp.
The fourth-quarter exodus trimmed the net inflow to tech ETFs in 2018 to $9.5 billion, although that still stands as the highest year-to-date inflow among S&P 500 sectors. It came as technology stocks in the S&P 500 Index, which had been among the biggest gainers in the bull market, tumbled 18 percent in their worst quarter since the 26 percent plunge they posted during the fourth quarter of 2008.
“Tech was such a hot sector for so long that the flows it built up in the first three quarters of the year are enough to offset the fourth from a year-to-date perspective,” said Eric Balchunas, an ETF analyst for Bloomberg Intelligence. “However, the recent flows suggest that tech’s best days are behind it, at least in the medium term. We’ve stopped seeing the kind of quick optimism or buy-the-dip mentality that we’ve seen in years past.”
It’s been a “year of regime changes” as investors rotated out of “aggressive” and high-growth sectors such as technology and moved into those seen as safer, Balchunas said. ETFs investing in utility stocks, for example, saw fourth-quarter inflows of $1.6 billion.
The S&P 500 information technology sector is on track for its fourth straight monthly decline, its longest such streak since 2006. The stocks are tumbling amid deepening concerns over valuations, the pace of economic growth, and macroeconomic issues such as U.S.-China trade policy.
In particular, concerns over the demand prospects for Apple’s iPhone sparked heavy selling, sending Apple into a bear market and as it lost its title as the largest stock on Wall Street. Those concerns were augmented by weak outlooks from a number of high-profile semiconductor companies.