Tech Wreck? What the Heck?

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The technology sector had been this year’s high flier. Investors gravitated to the large-cap, proven winners, and why not? In a low growth world, investors were more than happy to pay up for those companies poised to grow faster than others. However, once the Federal Reserve looked determined to keep raising the price of money, stocks trading at higher multiples of their earnings started to look less desirable and more risky at a higher discount rate. What if that expected growth doesn’t materialize, given the trade tensions and the China slowdown?

Hence, the tech sector and newly formed communication services sector (which contains many of the former tech sector stocks) have been the worst performers over the last month — with the exception of energy stocks, which are under siege due to plunging oil prices. Consumer staples, utilities and materials have been the only sectors to post positive returns over the last month.

While tech investors have been crying in their gravy, they may have missed the fact that emerging markets have been UP 2% in the last month and global real estate investment trusts (REITs) have gained 2.8%. What’s more, the equivalent of last week’s leftovers — long U.S. Treasury bonds —also are up, 1% in the last 30 days. Sure sounds like a good case for global diversification and not jumping on the bandwagon based on past returns.

Please see an example of effective global diversification on page 4 of the Global Perspectives Book and don’t forget to set your scales back 10 pounds this week.

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