Asset Allocation
U.S. technology stock prices have surged for years, leading some to wonder if this rally can continue. But there are several reasons we believe this is not a repeat of the tech bubble. At its peak in 2000, the technology sector represented 34% of the S&P 500 Index’s market cap, but only 16% of its cumulative earnings. Unprofitable companies often sold for unsustainable prices, and the sector crashed back to levels more in line with fundamentals. Over the last decade, tech’s index weight has been on the rise again, but the pace has been steady and proportionate to earnings growth. There is no doubt that valuations are elevated, but with profits to support higher prices, the technology sector’s long-term growth prospects seem to be sustainable.
Past results are not predictive of results in future periods.
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Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and should not be considered advice, an endorsement or a recommendation.