News Highlights: Apple (AAPL), Microsoft (MSFT) – Seductive Technology ETF has a lot of tailwind by 2021
It’s the largest sector in the S&P 500 and arguably the most loved, so it’s no surprise that technology is drawing a crow.
Unsurprisingly, some traders love to leverage technology exchange-traded funds and in a growing universe of such tactical instruments, an old friend should be on traders’ radar screens this year: The Direxion Daily Technology Bull 3X Shares (NYSE: TECL).
Up almost 16% in the past week, TECL tries deliver three times the daily return of the S&P 500 Technology Table of contents. That makes TECL a leveraged proxy on Apple (NASDAQ: AAPL) and Microsoft (NASDAQ: MSFT), as these two tech titans together account for more than 43% of that index.
Why it matters
As a triple-leveraged play on a sector that is not exactly compliant, TECL should not be held for more than a few days in a row. However, the environment is good for merchants to move in and out of TECL in the course of 2021.
“If part of the contention for further equity gains is tremendous central bank liquidity, technology should capitalize on this trend, especially if volatility continues to decline. Since 2008, technology generally performs better when financial conditions improve. Average outperformance is approximately 30-35 basis points (bps) per month, ” according to BlackRock.
Another reason traders may want to embrace TECL this year is that due to its obvious negative consequences, the coronavirus pandemic has some positive effects on technology.
“A good example of this is online shopping. When we look at domestic credit card information, we see an interesting pattern. As you might expect, the share of spending going to online retailers has skyrocketed at the start of the pandemic, BlackRock notes. “Less obvious was the lasting strength of this trend. Even as lockdowns eased, the online retailer’s portfolio share remained high compared to the pre-pandemic norm. In other words, even as consumer mobility returned, many households began to appreciate the convenience of services such as online grocery delivery. “
Another catalyst for TECL is the robust consumer side of the tech story – one that’s a potential spark for many of the stocks in the TECL index, such as Apple.
“Household technology spending increased by more than $ 100 billion or 25% in the six months between May and November. While part of the year-end boom was due to early holiday spending, the trend is clear and has been around for a while, ”BlackRock notes. “For investors, all of this suggests turning within technology rather than leaving the industry.”
© 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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