Chart of the week: Tech’s growth has outpaced the market

The sector should hold up well

While there are more defensive sectors out there, we think that tech will hold up well compared to the overall market in a downturn. There are two reasons for this resilience. First, tech stocks have secular growth drivers powerful enough to override the economic cycle. As the economy becomes digitalised, the suppliers of digital tools and services will comprise a rising share of corporate budgets and consumer spending. Second, the more economically and trade sensitive technology hardware companies (for example, chipmakers) only account for 20% of the overall tech sector by market value. The other 80% is made up of software and services, which tend to be less sensitive to the ups and downs of the broader economy, with recurring revenue streams. Read more about our views on tech’s sensitivity to the economic cycle in our ‘Rethinking tech’, an article in our latest InvestmentInsights.

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