XLF Vs. XLK: Since Tech May Have A Problem, Look To Financials

Chetan Woodun profile picture
Chetan Woodun
5.92K Followers

Summary

  • At the time of writing, the financial results of Apple had boosted the Nasdaq by 1.8% on Friday 28.
  • However, looking deeper, there are indicators that cast some doubts as to the future of Tech, Microsoft, and XLK, at least in the short to medium term.
  • Also, the rate at which these two Big Techs are growing earnings does not support XLK's valuations when compared to XLF.
  • In this case, it is Financials with XLF that offers better opportunities as the Fed is likely to continue to raise interest rates aggressively.
  • Thus, XLF is a buy while I have a hold position on tech.

Wall street sign in New York with New York Stock Exchange background

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The financial sector has been less prone to volatility than Tech as evidenced by the Technology Select Sector SPDR ETF (NYSEARCA:XLK) underperforming the Financial Select Sector SPDR ETF (NYSEARCA:XLF) by nearly 13% since

Chart
Data by YCharts

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XLK's Top Holdings (SSGA)

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Comparing XLK and XLF metrics (SSGA)

telco.vmware.com

XLF Top holdings (SSGA)

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Comparing metrics, Asset Flows, and SMAs (Seeking Alpha)

This article was written by

Chetan Woodun profile picture
5.92K Followers
My aim is to provide differentiated insights, whether it is for investing, trading, or informational reasons. For this purpose, I am not a classical equity researcher or fund manager, but, I come from the IT world as the founder of Keylogin Information and Technologies Co. Ltd. Thus, my research is often backed by analytics and I make frequent use of charts to support my position.I also invest, and thus, in this tumultuous market, I often look for strategies to preserve capital. As per my career history below, I have wide experience, initially as an implementer in virtualization and cloud, and I was subsequently a team leader and project lead, mostly working in telcos.I have also been a mediocre entrepreneur in real estate, and a farmer, and like to dedicate at least 5 hours per week to working on a non-profit basis. For this purpose, I regularly contribute peer reviews and opinions for enterprise tech and help needy families by providing sponsored work.As for Research, I started with Tech stocks before going Multi-Tech with Fintechs, Biotechs, and Cryptotechs.I have been investing for the last 25 years, initially in mutual funds where the "learned economists" would always advise you to "think long term". Got a lot of experience in the 2008/2009 downturn when I lost a lot. Since then I do my own research and have fallen in love with Seeking Alpha because of the unique perspectives it provides to someone investing hard-earned money as well as access to some of the best financial advisors.We live only once but can have many "investment lives" especially when investing in individual stocks.

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: This is an investment thesis and is intended for informational purposes. Investors are kindly requested to do additional research before investing.

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