Protecting and managing wealth is at the heart of what we do

Millennials – global guardians of capital Millennials – global guardians of capital

Find out why millennials matter, unravel some commonly held beliefs, and see how their habits will play a pivotal role in the way the world spends its private wealth.

Stay on top with the UBS Morning Brief app Stay on top with the UBS Morning Brief app

Daily top investment stories right at your fingertips.

Shifting Asia: How artificial intelligence will transform Asia Shifting Asia: How artificial intelligence will transform Asia

Artificial intelligence has the potential to reshape our world. So how will it impact Asian economies, businesses and societies? In the second edition of Shifting Asia, we analyze Asia's AI-powered future and the challenges and opportunities it will bring forth.

Market News Market News

Clear perspectives

UBS Wealth Insights group on LinkedIn UBS Wealth Insights group on LinkedIn

Explore wealth management and market trends in Asia Pacific, exchange your ideas and share your insights through the forum.

UBS Wealth Management online UBS Wealth Management online

Stay connected to your investment goals while on the go.

Receive fast and convenient 24-hour access to your portfolio anytime, anywhere. 

UBS House View Weekly

No tech wreck on deck

Deeper dive

No tech wreck on deck

It seemed like technology stocks were on a roll. The sector was up 22% this year through 8 June, accounting for 10 of the top 20 performers in the S&P 500, and four of the five largest US stocks by market value are in technology. But the sector suffered a setback last week. On seemingly no news, technology underperformed the broader market last Friday by the biggest margin since October 2008.

We do not consider this cause for concern for either the tech sector or the US market more broadly: 

Tech valuations are not unreasonable. Valuations have expanded over the past few years, but at 18.5 times forward consensus earnings they are nowhere near their 2000 peak of 55.1x. Relative to the S&P 500, the sector currently trades at just a 5% premium, compared to its 20-year average premium of 25%. 

Fundamentals are solid. Most cyclical and longer-term earnings fundamentals for the tech sector appear healthy. Enterprise spending is accelerating as companies position for cloud architectures. Internet advertising

IT sector doesn’t look overvalued relative to the index

IT sector doesn’t look overvalued relative to the index

continues to take share from traditional media platforms. And while end-market penetration of smartphones appears mature, most stocks linked to this market already trade at a 15% valuation discount to the sector. Overall, we expect earnings growth of close to 10% this year and next for both the tech sector and the S&P 500 to prolong the bull market in US equities. 

Tech isn’t the only game in town. Today tech represents 22.6% of the S&P 500, compared to nearly 35% in 2000. Nine of the 11 S&P 500 sectors this year have generated a total return of greater than 5%, indicating that the market’s performance is broad-based.

From our viewpoint, the sell-off stems more from a rotation into lagging market segments than concerns about sector fundamentals. After all, the US equity market remains close to its all-time high despite the technology reversal.

Through early June, growth stocks outperformed value stocks by over 11 percentage points this year – the largest performance gap between the two styles during the first six months of the year since 2009. We recently upgraded US large-cap value stocks as we believe this lagging market segment now offers more attractive return prospects than growth over our six-month tactical time horizon. 

Mark Haefele
Global Chief Investment Officer
Wealth Management

Jeremy Zirin
Head of Investment Strategy
Wealth Management Americas

Bottom line

Fears of a tech bust triggering a bear market in US stocks appear unwarranted. Sector valuations are far from the extremes reached 15-20 years ago, and the outlook for large-cap technology companies appears bright. While

we think a continued rotation into value stocks appears likely in the next six months, improving fundamentals for sectors like energy and financials are likely to fuel it rather than weaker tech prospects.

Research highlights

Contact us

Contact us today to learn how we can help you meet your wealth management needs.

Contact me for Account Opening

Lodging and handling complaints

How can I lodge a complaint as a client? How will my complaint be handled?