Technology Investments Leading the Way in Economic Recovery

Although slight, there are some indicators that the U.S. economy is beginning to turnaround.For instance in July there was a decrease in the unemployment rate from 9.5 to 9.4 percent, the annual decline in gross domestic product for second quarter was smaller than had been anticipated and the Standard & Poor’s stock index is up nearly 12 percent since the start of the year.  Showing tremendous strides is the performance of technology stocks which are delivering double digit growth and are helping to reassure some investors that the worst of the recession is over. 

Highlights from the technology sector include Apple whose iPhone sales helped the company’s stock gain 93.9 percent since December 31, 2008.  Intel (29.5 percent) and Yahoo (19.8 percent) have also seen significant gains in this time period.  Demand for smartphones and mobile devices has swelled despite a recession that has chilled consumer spending.  This has not only benefited the manufacturers of these devices but also the companies that sell equipment to connect networks and transfer data. 

As a broader measure, the Nasdaq is up 26.8 percent for the year.  And although the S&P has experienced a 12 percent gain, if you factored out the technology sector, the index’s gains would only be 7.9 percent.  There is one index of IT companies within the S&P that is up 36 percent. 

So is this a long-term turnaround or just a bubble?  Analysts believe that answer will depend on how well the rest of the economy follows suit.  Any turbulence in the recovery process could affect technology stocks disproportionately because of their disproportionate rebound as compared with the rest of the market.  So, short-term investments could be more risky.  But for investors seeking long-term returns, analysts believe technology should perform well due to the fact that technology is central to the U.S. and global economies.  The demand for devices such as smartphones is hardly expected to be subdued any time soon. 

For more details, see the story in The Washington Post.