After reaching a multi-year low in early April amid the tariff-related market selloff, the Technology Select Sector SPDR Fund (NYSEARCA: XLK) has recovered some ground as of mid-May. However, the tech sector as represented by this benchmark fund is still experiencing a lackluster start to the year; XLK is down more than 6% year-to-date (YTD). This represents a sharp reversal from more than two years of fairly steady gains.
There are plenty of reasons for investors to be bearish on tech names. First, the threat of tariffs still looms, with many firms particularly dependent upon materials and components from China to keep up the pace of technological development and to maintain affordability for customers. Further, though, sticky inflation—and the prospect of tariff-related inflation increases—means that consumers are likely to continue to tighten belts, forgoing luxury purchases that often include expensive tech products.
