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.
The S&P 500 Composite Index (“Index”) is a product of S&P Dow Jones Indices LLC and/or its affiliates and has been licensed for use by Capital Group. Copyright © 2018 S&P Dow Jones Indices LLC, a division of S&P Global, and/or its affiliates. All rights reserved. Redistribution or reproduction in whole or in part are prohibited without written permission of S&P Dow Jones Indices LLC.
Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the mutual fund prospectuses and summary prospectuses, which can be obtained from a financial professional, and should be read carefully before investing. Similar information about collective investment trusts can be obtained from Capital Group or participants' plan provider or employer.
All Capital Group trademarks mentioned are owned by The Capital Group Companies, Inc., an affiliated company or fund. All other company and product names mentioned are the property of their respective companies.
Use of this website is intended for U.S. residents only.
American Funds Distributors, Inc., member FINRA.
This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.
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.