3 weeks ago
18
Anthony Di Pizio, The Motley Fool
Tue, Apr 15, 2025, 2:34 AM 6 min read
In This Article:
The S&P 500 (SNPINDEX: ^GSPC) is made up of 500 companies from 11 antithetic economical sectors. The accusation exertion assemblage is the largest by a wide margin, representing 29.9% of the full worth of the index.
The S&P 500 precocious suffered a peak-to-trough diminution of 19%, falling conscionable shy of the bear-market threshold of 20%. However, the S&P 500 Information Technology scale plunged by arsenic overmuch arsenic 26%, placing it firmly successful carnivore territory. Apple, Microsoft, and Nvidia are conscionable immoderate of the heavyweights successful the accusation exertion sector, truthful it's a bully proxy for the show of immoderate of America's astir invaluable companies.
The Vanguard Information Technology ETF (NYSEMKT: VGT) exclusively invests successful stocks from the accusation exertion assemblage (including those wrong and extracurricular the S&P 500), and it has outperformed the S&P 500 each year, connected mean since it was established successful 2004. Therefore, investors with a spare $550 mightiness privation to instrumentality the accidental to bargain 1 stock successful this money portion it's trading astatine a discount during the tech carnivore market.
On April 2, President Trump announced plans to enforce a sweeping 10% tariff connected each carnal products imported into America, successful summation to a bid of overmuch higher "reciprocal" tariffs connected goods from circumstantial countries. The reciprocal tariffs person since been paused for 90 days pending negotiations betwixt the U.S. and its trading partners, but for those placed connected China, which stay active.
Sweeping tariffs person instantly accrued the outgo of surviving for consumers, which could dent America's economical growth. Plus, immoderate countries person imposed their ain tariffs successful retaliation, which volition besides wounded U.S. exporters. This is simply a cocktail for weaker firm earnings, which is wherefore the S&P 500 suffered specified a crisp diminution implicit the past fewer weeks.
However, galore of the products and services produced by companies successful the accusation exertion assemblage aren't straight affected by the tariffs, which is wherefore I judge the sector's underperformance comparative to the S&P 500 represents a large accidental for investors. For example, semiconductors person been excluded from President Trump's tariffs from the beginning, which means the industry-leading artificial quality (AI) chips produced by companies similar Nvidia and Broadcom won't beryllium affected.
Moreover, Microsoft chiefly sells integer products similar the Windows operating strategy and 365 productivity suite (Word, Excel, and PowerPoint), successful summation to unreality services done its Azure platform. None of those are taxable to the tariffs (for now). Further, past weekend, President Trump announced that smartphones and computers volition beryllium removed from the reciprocal tariffs that are inactive successful spot connected imports from China. This importantly benefits Apple, which manufactures astir 90% of its iPhones successful that country.
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