Stocks

Why are Tech Stocks the Right Choice During the Coronavirus?

The coronavirus impacted heavily on the stock markets around the globe. Not only that, but the infection practically paralyzed whole countries, as people are trying to avoid leaving homes to dodge the virus. Amidst the panic and global economic downfall, most of the investors prefer to hold on to cash instead of sinking their money in shares.

On the other hand, the stock markets’ volatility is increasing. The majority of the futures fell to the record lows. Some analysts think that panic sell-off created good opportunities for investors to start building a long-term portfolio. After the virus impact cools, those stocks which are now lowered could bring hefty gains once again.

What’s happening on the stock market?

The stock markets endured massive sell-off during the last weeks due to the investors’ fears about the coronavirus pandemic. The major U.S. futures, the Dow Jones, the Nasdaq, and the S&P 500, tumbled down by more than 20% from their recent highs. The markets entered the bear territory during the last couple of days.

However, the U.S. tech sector has been more resilient so far compared with the other sectors. The Technology Select Sector SPDR Fund declined only by 18.2% from its 52-week high. Meanwhile, the Energy Select Sector SPDR Fund dropped by 53.2%, while the Financial Select Sector SPDR Fund, and Industrial Select Sector SPDR Fund have fallen by 26.5% and 26.2%, respectively.

Furthermore, tech companies are also cash-rich, which helps to stay afloat amidst the economic instability. Facebook, Amazon, Microsoft, Apple, and Alphabet’s Google have short-term investments and cumulative cash of more than $460 billion, according to the latest quarterly reports.

The experts stated that the reason for the sector’s resiliency is the massive long-term growth prospects of tech companies. And the sector experiences continuous digital transformation, which only adds its attraction.

Blockchain, IoT, AR/VR, autonomous vehicles, and wearables also offer high growth opportunities. And analysts are positive that the accelerated deployment of 5G technology will spur further growth.