Wall Street’s ‘Macro Agnostic’ Tech Trade Shatters ETF Records

Investors are plowing into technology-tracking ETFs at a record clip as conviction builds that the market’s biggest stocks can thrive in almost any economic cycle.

As fears of sticky inflation and climbing bond yields stalk markets, traders have been shoveling money into big tech all year, lured by best-in-class earnings growth and strong balance sheets. Tech exchange-traded funds have absorbed about $9.2 billion so far in 2024, the most of any other sector by a margin of nearly $7 billion.

Appetite is building for big tech as investors increasingly buy into the idea that the megacaps can fit into almost any box: growth strategies, haven bids or income plays. Microsoft Corp. and Alphabet Inc. were powerful reminders of that narrative, with the latter introducing its first-ever dividend after both companies crushed earnings estimates and helped propel the S&P 500 to its best weekly performance of the year.

Now, as the Federal Reserve looks to keep interest rates at elevated levels to combat stubborn inflation, the thinking goes that profitable tech companies will be able to handle the pressure.

“We would be focusing very strongly on those companies which have the pricing power, cash flow, strong balance sheets, are able to out-compete the others in their sector. Which actually takes you back to tech,” Seema Shah, chief global strategist at Principal Asset Management, said on Bloomberg Television. “Whichever way you slice and dice it, we continue to like that megacap tech space.”

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Microsoft and Alphabet delivered first-quarter revenue that topped expectations and reports that were strong enough to help “offset concerns over the US economic outlook,” UBS Global Wealth Management wrote. All told, tech revenue is expected to rise 8.6% for the quarter, more than double the 3.5% gain anticipated for the broader S&P 500, according to Bloomberg Intelligence.