Major Moves

In a market that has been negatively affected by so much geopolitical uncertainty, it's amazing just how consistent the performance of the technology sector has been. There's a strategy in investing that draws on the same principle found in Newton's first law of motion – an object in motion tends to stay in motion, and an object at rest tends to stay at rest unless acted upon by an outside force.

This strategy is called momentum investing. In momentum investing, you look for the sectors and stocks that are doing well, and you put your money into those sectors and stocks with the anticipation that they will continue to do well in the future unless acted upon by negative news.

One way to find which sectors and stocks are doing well is to conduct a relative-strength analysis. This is an exercise where you compare how well a sector or stock has done in the past compared to other sectors or stocks or to a broad-based index, like the S&P 500.

The Technology Select Sector SPDR Fund (XLK) – has been the clear winner on Wall Street since the market pulled back in February 2016.

Knowing this, it should come as no surprise that the top performing sector since the market started rebounding on June 4 has been the technology sector.

Of course, the technology sector has experienced just as much volatility as the other sectors on Wall Street as trade war rhetoric has flared up and cooled down and as threats of tariffs have materialized over night and vanished just as quickly, but the outperformance by the technology sector has remained consistent.

Unless something fundamentally changes in the outlook for the U.S. economy, we wouldn't be surprised to see this trend continue.

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