Breakdown

July 23, 2021

By Steven Vannelli, CFA in Economy, Knowledge Leaders, Markets

We believe the technology sector is broadly breaking down. That’s the bad news.

The good news is that the correlation between pure growth stocks and pure value stocks has plunged. This means that growth only explains about 5% of the movement in value stocks right now. If present correlations hold, it is mathematically possible that technology could underperform while the broader market is mostly unaffected.

In our Quarterly Strategy Update, we track the data behind these trends and spotlight a handful of innovative non-technology companies that we believe could outperform in the backdrop of technology weakness.

Download slides here: Breakdown

Tags > Correlation, Growth, tech, tech breakdown, Value

Disclosures

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The information provided on this blog is for illustrative or example purposes only and should not be construed as KLC’s opinion or investment outlook. As of the most recent quarter end, the named companies may have been held by KLC. For full information including additional policies and full disclosures, please visit our website: KnowledgeLeadersCapital.com.

Any reference to Index performance does not represent the performance of any investment product offered by Knowledge Leaders Capital, LLC. An investor cannot invest directly in an index. The performance of client account may vary from the Index performance. Index returns shown are not reflective of actual investor performance nor do they reflect fees and expenses applicable to investing.

Companies are selected for “Spotlights” based on high levels of innovation activities in their respective industries and illustrate innovation being employed across all sectors and geographies. Spotlight selection is separate from stock selection by the investment team. Spotlights are not necessarily representative of investment opportunities and can be selected regardless of investment performance or inclusion as a KLC holding.