The tech sector has been the engine driving stock market gains this year, with giants like Apple Inc (NASDAQ:AAPL), Microsoft Corp (NASDAQ:MSFT) and Nvidia Corp (NASDAQ:NVDA) leading the charge.
But can this momentum last through the second half of 2024? The answer lies in a mix of valuation, earnings and the ever-evolving landscape of technology, according to Direxion Managing Director Ed Egilinsky.
“Technology has led the market again this year,” Egilinsky tells Benzinga. “However, valuations within the Technology sector are pricey right now, so we will see if the growth can continue to support it. A fresh tech earnings season is upon us and one of the key things to watch will be if AI continues to be a key driver.”
Despite high valuations, investors are showing mixed sentiment through Direxion’s leveraged ETFs. Egilinsky notes that while their Direxion Technology Bull 3X Shares (NYSE:TECL) is seeing outflows, the corresponding Direxion Technology Bear 3X Shares (NYSE:TECS) is gaining interest.
Meanwhile, single stock leveraged ETFs tied to tech heavyweights Direxion Daily MSFT Bull 2X Shares (NYSE:MSFU), Direxion Daily NVDA Bull 2X Shares (NYSE:NVDU) and Direxion Daily AAPL Bull 2X Shares (NYSE:AAPU) are drawing significant inflows into their bullish products.
For those considering strategic allocations, Egilinsky points to the Direxion Equal Weight NASDAQ 100 ETF (NYSE:QQQE) as a tool for diversification.
“The Magnificent Seven represents over a 40% weighting within the Nasdaq 100. An equal weight approach provides more diversification where each stock receives a 1% weighting, avoiding single stock concentration risk,” he says.
Among the Magnificent 7 stocks, Egilinsky singles out Google/Alphabet Inc (NASDAQ:GOOGL) (NASDAQ:GOOG) and Meta Platforms Inc (NASDAQ:META) as relatively reasonably valued compared to their peers, despite being “not cheap at these levels.”
Read Also: EXCLUSIVE: Meta’s AI, Metaverse Growth Drive Launch Of New Direxion Leveraged And Inverse ETFs
Both companies, alongside the other members of the Mag 7, are near all-time highs, but they could face increased volatility as the U.S. election approaches.
“When looking at the Magnificent Seven, all of them (excluding Tesla Inc (NASDAQ: TSLA)) are currently at or near all-time highs,” Egilinsky says.
“We should continue to see volatility pick up, especially as we get closer to the upcoming U.S. election and our suite of leveraged and inverse single stock ETFs allow active traders to take advantage of short-term price movements.”
While the Mag 7 continues to dominate, Egilinsky identifies the cybersecurity sector as a potential disruptor. “The cybersecurity stocks, as a group, have significantly lagged the broader sector,” he notes. “With the upcoming U.S. election, cybersecurity will be top of mind.”
As H2 2024 unfolds, the tech sector’s trajectory will be shaped by earnings, valuations and emerging threats.
Investors, both bullish and bearish, will need to stay nimble, leveraging tools like those offered by Direxion to navigate the twists and turns of this dynamic market.
Read Next:
