Tech’s reign over U.S. stock market to be tested in 2021

NEW YORK (Reuters) -Investors are weighing how big to go on U.S. technology stocks in the coming year, as pricier valuations, regulatory risks and a revival of the market’s beaten-down names threaten to dim their allure.

A surge in technology and internet-related shares helped lift U.S. indexes to record highs this year. Gains in Apple, Amazon and Microsoft alone accounted for more than half of the S&P 500’s 16.6% total return as of Dec. 16, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.

Tech took a back seat in recent weeks, as hopes of a vaccine-led economic recovery fueled a rally in energy, financials, small caps and other less-loved parts of the market. The Russell 1000 value index climbed 10% since breakthrough vaccine data was announced in early November, compared to a 4% gain in the Russell growth index, which is broadly populated by tech stocks.

Though it is unclear how long the change in market leadership will last, the shift highlights a dilemma that has confronted investors throughout the last decade. Limiting tech exposure has mostly been a losing bet for years and the coronavirus pandemic accelerated trends that stand to benefit the group. Reuters News

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