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Investors went crazy buying shares of tech giants in the "tech faith" comeback

AInvestTuesday, Aug 13, 2024 7:41 pm ET
1min read

Investors are pouring millions of dollars back into large-cap stocks as the tech-heavy S&P 500 index recovers from last week’s market rout, with traders pouring $210mn into the XLG, the top 50 ETF by the Bloomberg Intelligence S&P 500 Index, according to data compiled by Bloomberg. The record inflows have pushed the fund’s assets up 4 per cent to $5.3bn, with nearly half of that in the past year.

The XLG tracks the top 50 companies in the S&P 500 index. The fund’s popularity shows investors’ unwavering faith in large-cap growth stocks dominated by tech, which have powered record highs this year.

The fund’s large-cap holdings include Apple (AAPL.US), Meta (META.US), Nvidia (NVDA.US), Google (GOOG.US), Microsoft (MSFT.US), Amazon (AMZN.US), which have been the main contributors to the year’s market gains and are among the so-called “Big Seven”. The index tracking these stocks has surged more than 30 per cent this year.

Nick Kalivas, head of iShares and Core Equity Products at Invesco, said: “XLG is a popular investment tool that provides exposure to large-cap stocks while offering trading convenience and liquidity. The increased interest in using it as a tool for large-cap exposure is not surprising.”

XLG attracts record inflows

For much of the year, tech stocks have led the market on the back of AI enthusiasm. Concerns about overvaluation and when AI investments will finally deliver returns, as well as worries about the Federal Reserve waiting too long to cut its benchmark interest rates, have seen some of those stocks fall in recent days, even as the Nasdaq 100 index rallied again this week.

Cayla Seder, macro multi-asset strategist at State Street Global Markets, said: “Tech stocks still have a lot of advantages, especially in terms of quality. They are one of the best-performing stock sectors in terms of earnings yield, cash flow and ROE. So it makes a lot of sense to buy quality stocks on dips as we enter an uncertain economic period.”

Disclaimer: the above is a summary showing certain market information. AInvest is not responsible for any data errors, omissions or other information that may be displayed incorrectly as the data is derived from a third party source. Communications displaying market prices, data and other information available in this post are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any security. Please do your own research when investing. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit, or protect against loss in a down market.