The year 2017 was a blockbuster year for investors as all the three major indices indicating the health of the U.S. market closed at record levels. An improved economic data for GDP, steady job additions, a favorable Consumer Confidence Index as well as factory activity data kept investors optimistic about the economy.
The Tech sector was one of the largest beneficiaries of this rally, with the Technology Select Sector SPDR ETF XLK registering a return of 32.2% in the last year, on top of a 12.9% gain it registered in 2016.
Tech Stocks Poised for Further Growth
The technology sector is likely to grow further in 2018, as evident from the recent forecast provided by Gartner Inc. IT on worldwide IT spending. The latest report from the independent research firm projects global IT spending to reach $3.7 trillion this year, representing an increase of 4.3% from $3.5 trillion projected in 2017.
The sector will continue to benefit from the rising demand for cloud-based platforms, rapid adoption of Artificial Intelligence (AI) tools, Augmented/Virtual (AR/VR) reality devices, autonomous cars, advanced driver assisted systems (ADAS), as well as Internet of Things (IoT) related software and hardware.
However, in our opinion, the major push will come from the recently-passed Tax Cuts and Jobs Act or tax bill as it will bring double benefit for tech companies. Firstly, it will lift corporate earnings and secondly, as companies across other sectors might utilize savings from lower tax as well as cash repatriations for technological upgradation this will again be conducive for the tech stocks.
Naturally, investing in the tech space makes perfect sense at this point.