It’s been a turbulent year for technology stocks.
Though tech remains the S&P 500’s top-performing sector year to date, up almost 33%, the gains have not come without some notable hurdles.
In Washington, scrutiny around Big Tech — namely the market’s five largest companies, Apple, Amazon, Alphabet, Facebook and Microsoft — has become somewhat bipartisan.
On the left, Democratic lawmakers have called for Apple, Amazon, Alphabet and Facebook to break themselves up to avoid wielding “monopoly power” over consumers.
Across the aisle, Facebook and Twitter are now under pressure from Senate Republicans over an unverified New York Post story containing allegedly damaging information about Democratic nominee and former Vice President Joe Biden’s son Hunter.
One chart puts tech’s resilience into perspective, particularly as investors brace for the upcoming presidential election, said Todd Gordon, founder of TradingAnalysis.com.
“I have friends and clients and colleagues who come to me and say, ‘Should I hedge? Should I get out ahead of this election?’ And I say no,” he said Thursday on CNBC’s “Trading Nation.” “If you’re under 50 years old, you want to see a little post-election volatility to add specifically to technology.”
Gordon backed up his advice with a chart of the ratio between the Nasdaq 100 and the S&P 500 extending back to 1993.
“It just broke to a new high. So, the tech boom of 2000 has been exceeded in terms of the relative outperformance of technology into the S&P,” Gordon said. “So, I say stay with the trend.”
All in all, Gordon didn’t expect the impending election or the winning candidate to have much impact on the tech sector barring some short-term volatility. He also didn’t anticipate the Democrats’ calls for Big Tech breakups to bear fruit because of tech’s largely deflationary pressure on consumer prices.
“Long term, favor tech,” he said. “I think it continues to go.”
Gina Sanchez, founder and CEO of Chantico Global and chief market strategist at Lido Advisors, doubled down on tech’s resilience, noting that Congress’ last big antitrust battle over tech was the 1998 case of the United States v. Microsoft.
“Regardless of who you think is going to win the presidency, the fact is that Congress is going to be in the driver’s seat on this,” Sanchez said in the same “Trading Nation” interview.
“I think Todd is absolutely right that their biggest concern is the impact to what happens to the consumer experience and that gets very muddled with that deflationary effect that he is talking about, which could lead us to, let’s call it a less tough stance than we might otherwise be expecting,” she said.
In other words, a Democratic Congress’ “bark is going to be a lot worse than the bite,” Sanchez said.
“I think that the underlying drivers for a lot of these stocks are going to remain in place.”
The Nasdaq 100 fell by less than 1% on Thursday.
Disclosure: Sanchez and Lido Advisors both own shares of Microsoft. Lido Advisors owns shares of Microsoft, Alphabet and Facebook.
