Over the last half-year we have increasingly favored US equities over other assets but have long viewed high tech stocks as attractive from a secular perspective. (See our previous features – Shifting Tectonic Plates, Gauging Earnings Yields, Divergent Universes and Secular/Cyclical Forces). Additionally, however, the ongoing steady growth of information technology is transforming segments of high tech into a sector similar to Consumer Staples (e.g., Proctor & Gamble, Coca Cola and Colgate Palmolive) – i.e., less vulnerable to cyclical downturns. (See our previous features – Beyond US Obligations and Steady Growers). This helps explain the decline in volatility of the information-technology-laden Nasdaq 100 (e.g., Apple, Google and Intel) relative to other traditional cyclicals like Industrials (e.g., GE, Caterpillar and 3M).
The indispensable and growing role of information technology globally implies greater earnings stability and growth for this sector – favoring it over other cyclicals.
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