Throwing yet another wrench into the markets, there is labor market data to process.
Vanguard Information Technology Index Fund (VGT) is down 12% in the last month but has gained 3.5% over the last year. VGT is heavily weighted in Apple, Nvidia, and Microsoft, which account for nearly 50% of its holdings. Despite a 21% correction, VGT's valuation remains high with a P/E ratio of 33.2, but earnings growth is strong at 28.3%.
U.S. stock markets are in turmoil. Since the start of the year, the benchmark S&P 500 has plunged by over 11%, and the tech-laden Nasdaq-100 has dropped by over 16%, as of this writing.
The S&P 500 (SNPINDEX: ^GSPC) is made up of 500 companies from 11 different economic sectors. The information technology sector is the largest by a wide margin, representing 29.9% of the entire value of the index.
VGT has outperformed the SP500 with an average return of 15.52% since 2004, despite recent volatility and a 24.12% loss this year. The ETF is heavily concentrated in tech giants like AAPL, NVDA, and MSFT, which make up 45.98% of its holdings, increasing sector-specific risk. VGT offers a higher CAGR (17.43%) and better diversification with 314 companies compared to its substitutes, making it attractive for long-term growth and regular income.
Many investors are scanning the investment horizon right now, trying to decipher what's coming down the road. President Donald Trump's tariffs are causing panic among many and have spurred economists to revise their recession predictions upward.
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After dipping into correction territory late last week, the S&P 500 (^GSPC 1.08%) is currently down by 8.73% since mid-February, as of this writing. Recession fears are still surging, however, with close to 60% of U.S. investors feeling pessimistic about the market's six-month future, according to a mid-March survey from the American Association of Individual Investors.
VGT ETF is down 11.8% YTD but boasts a strong 19.8% average annual return over the past decade, outperforming the S&P500 by ~7% annually. VGT is well-diversified across critical tech sub-sectors like semiconductors and software, crucial for the AI era, with top holdings including Apple, Nvidia, and Microsoft. The fund has a low expense ratio (0.09%) and high liquidity ($100 billion AUM), but relatively high valuation metrics indicate it is a higher risk/reward propostion for investors.
The S&P 500 (^GSPC -1.39%) is made up of 500 companies from 11 different sectors of the U.S. economy, but the information technology sector is the largest in the index by far, representing 30.1% of its entire value.
VGT is a leading tech ETF with a competitive Sharpe ratio, even compared to the Nasdaq and other Information Technology ETFs. VGT, like the Information Technology sector, has a negative current and forward ERP, considering Treasury yields above 4%. Despite this, net inflows into the ETF remain positive, even as the market starts to see an increase in PUT options, particularly from hedge funds.
Apple, Nvidia, and Microsoft are the world's three largest companies, with a combined value of $10 trillion. Each operates in the information technology sector, which is responsible for developing the hardware and software that powers everything from the internet to personal computers.