With 2017 officially marking the fourth year in a row in which technology stocks outperformed the broader S&P 500 index, the question of whether 2018 will be yet another repeat, or be the year technology stocks correct, is a hot topic of debate right now. While many on Wall Street expect strong long-term performance from the tech sector overall, 2018 is an entirely different animal.
Valuations have continued to increase at breakneck speed, and for many of the largest tech companies in North America, growth has managed to keep pace with increased expectations set by investors and analysts during the previous fiscal year, inviting feelings of optimism and an inkling that higher growth levels may represent a “new normal” moving forward for certain tech darlings.
That said, potential headwinds in 2018 relating to the implementation of the new tax plan put forward by the Trump Administration stare many tech companies in the face at the beginning of 2018; as tax rates get adjusted downward, investors may be better suited putting their money into industries with higher than average taxation rates.
With the technology sector generally considered to be one of the least-taxed sectors in the U.S., the new tax plan may actually provide one of the strongest headwinds for the sector, as institutional money takes profits from tech and plays the short-term tax bump which is likely to make an impact for most other sectors.
Invest wisely, my friends.
