As Apple hits a new high, will technology stocks continue to outperform?

Our experts discuss why tech stocks continue to do well and the outlook for the sector.

It has been a record-breaking year for the tech sector despite, or perhaps because of the Covid-19 market disruption, with Apple (NASDAQ:AAPL) becoming the latest firm to reach a new high this week.

Surging tech names, such as the so called FAANG stocks, have helped drag the S&P 500 from its lowest point since the financial crash over a decade ago, and push the Nasdaq composite to an intraday record yesterday.

Technology is a popular theme among interactive investor customers this year, accounting for 6 out of the 10 most-bought US stocks on the platform (Tesla included, in first place).

Some of the most-popular stocks reflected our new ‘lockdown lives’ – with Zoom Video Communications (NASDAQ:ZM) making the top 10 for the first time in 2020, alongside Amazon (NASDAQ:AMZN), which has experienced an uptick in sales during the closure of shops selling non-essential items.

But why exactly is technology doing so well and will the sector continue to outperform?

Lee Wild, Head of Equity Strategy, interactive investor, says: “The tech sector has reasserted its dominance during the pandemic. Indeed, a handful of the world’s biggest tech players have been the driving force behind the biggest market rebound since the financial crisis just over a decade ago. 

“Apple’s meteoric rise is evidence that technology has been the key theme during the lockdown period, reminding us how dependent we all are on our mobile devices. A combination of high-end products and a loyal and fanatical customer base has, once again, underpinned demand for Apple shares during the pandemic. It will be interesting to see whether its dominance is affected by any downturn in consumer spending during the recession.

“The coronavirus lockdown played to the hands of the biggest technology players, with firms such as Amazon, up 49.6% this year, benefitting from the closure of shops selling non-essential items, and Zoom, up 272%, a clear winner from the working from home trend which could easily continue post Covid. 

“The tech sector’s future outperformance will be heavily influenced by the outcome of the US-China trade dispute, as tech firms’ flagship products such as smartphones and personal computers rely on parts manufactured in China.”

Most-bought US stocks on interactive investor from 1 January 2020 to 23 June 2020