After driving much of the S&P 500’s returns for the year, technology stocks underperformed in October while the rest of the market rallied.
- Tech leadership reversed in October. IT and Communication Services, roughly half the index by weight, subtracted about -4.2 percentage points and pulled the S&P 500 to a -0.9% loss. Semiconductor stocks (as measured by the iShares Semiconductor ETF, SOXX) in particular significantly underperformed, -17% for the month.
- Non-tech sectors moved higher. All nine other S&P 500 sectors gained in October, adding about 3.3 percentage points to the index. Defensive and value-oriented sectors led: Energy (+14.0%), Consumer Staples (+11.8%), Utilities (+10.2%) and Health Care (+9.9%). The equal-weighted S&P 500 gained about 4.9%, roughly 5.8 percentage points ahead of the market-cap-weighted index.
- One month isn’t a trend, but it shows the value of diversification. Leadership swung sharply since summer: semiconductor stocks fell more than 20% in July, then rebounded ~11% in September before plunging again in October. This volatility underscores the importance of maintaining diversification rather than relying on the market’s recent leaders.
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