The technology sector in the United States has been hammered since late August and early September.
The iShares Dow Jones US Technology ETF (NYSE:IYW), which tracks the largest publicly listed U.S. tech companies, has dropped 18% over the past three months. Shares have now dropped 3.2% in 2018 so far. This represents the sharpest drop in this ETF, and the tech sector at large, since the 2008 financial crisis.
The NASDAQ slipped into bear market territory on Thursday for the first time since 2008. U.S. stocks sputtered on Wednesday after the US Federal Reserve moved forward on a rate hike that will see the benchmark move to 2.25% to 2.50%.
Traders has expected a rate hike but comments from chairman Jerome Powell were what sparked much of the selloff. The financial sector was likely searching for more dovish signals in the middle of market turbulence.
Concerns over the growth prospects of tech giants were exacerbated in October when Alphabet (NASDAQ: GOOGL), Apple (NASDAQ:AAPL), and Facebook (NASDAQ: FB) released disappointing earnings.
The tech sector has also been under increasing pressure from governments over how to proceed as geopolitical tensions are ramping up. In the aftermath of the 2016 U.S. election, Facebook was strong-armed into making changes to its platform that have resulted in declining monthly users.
The last two times the NASDAQ fell into a bear market, it took at least a year for it to recover. The easy monetary policies that followed the 2008-2009 recession are unlikely to be forthcoming with central banks struggling for wiggle room.
Investors should remain on the sidelines when it comes to the U.S. tech sector as we look ahead to the New Year.
