The technology sector has led the stock market rally this year. Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT) and NVIDIA Corporation (NASDAQ:NVDA) is leading the way.
But will this momentum continue into the second half of 2024? The answer lies in a combination of valuations, revenues and an ever-evolving technology landscape, says Direxion's managing director. Ed Egilinski.
“Technology has driven the market again this year,” Egilinski told Benzinga, “but valuations for the tech sector are currently so high that it will be interesting to see if growth continues to support that. With another tech earnings season upon us, one key thing to watch is whether AI will continue to be a key driver.”
Tech-focused leveraged ETFs inflow, mixed sentiment among investors
Despite the high valuation, investors are expressing mixed feelings about Direxion's leveraged ETFs. Direxion Technology Bullish 3x Stock (NYSE:TECL) is experiencing outflows and accordingly Direxion Technology Bear 3x shares (NYSE:TECS) is getting some attention.
On the other hand, single-stock leveraged ETFs linked to major tech companies Direxion Daily MSFT Bull 2x Shares (NYSE:MSFU), Direxion Daily NVDA Bull Double Shares (NYSE:NVDU) and Direxion Daily AAPL Bull 2x Shares (NYSE:AAPU) has attracted significant inflows into bullish products.
For those considering strategic allocation, Egilinski has this to say: Direxion Equal Weight NASDAQ 100 ETF (NYSE:QQQE) as a diversification tool.
“The Magnificent Seven account for more than 40% of the Nasdaq 100 index. Under an equal weighting method, each stock is given a 1% weighting, which avoids single stock concentration risk and allows for a more diversified investment,” he says.
Google says Meta is “not cheap,” but has a relatively reasonable valuation
Among his seven most magnificent stocks, Egilinski singled out Google in particular.Alphabet Inc. (NASDAQ:GOOGL) (NASDAQ:GOOG) and Meta Platforms, Inc. (NASDAQ:META) is rated as being relatively fairly valued compared to its peers, even though it's “not cheap at these levels.”
Related Article: Exclusive: Meta's AI, Metaverse Growth Drive Launch of New Direxion Leveraged and Inverse ETFs
Both companies, along with the rest of the Mag7, are nearing all-time highs but could see increased volatility as the U.S. presidential election approaches.
“When I look at The Magnificent Seven, Tesla “(NASDAQ: TSLA) is currently at or near all-time highs,” Egilinski said.
Egilinski predicts increased volatility as the US election approaches…
“Volatility should continue to rise, especially as the U.S. presidential election approaches. Our leveraged and inverse single-stock ETFs allow active traders to take advantage of short-term price fluctuations.”
…ranks cybersecurity as a “top priority” area
While Mag7 continues to dominate, Egilinski points to the cybersecurity sector as a potential disruptor. “Cybersecurity stocks as a whole have significantly lagged the broader sector,” he notes. “With the U.S. presidential election approaching, cybersecurity will be a top concern.”
As the second half of 2024 progresses, the tech sector's trajectory will be shaped by earnings, valuations, and emerging threats.
Investors, both bullish and bearish, need to remain agile and utilize tools like those provided by Direxion to navigate the twists and turns of this dynamic market.
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