Don’t Fear Investing in the Stock Market Because of This Sector

There is no doubt internet stocks have had quite a rise since the technology bubble of the late 90’s. Many people wonder how long it will continue to be a top performing sector.

Here are four data points you need to know:

1. From 12/31/02-12/31/16, the Dow Jones Internet Composite Index posted an average annual total return of 17.48%, compared to 9.11% for the S&P 500 Index.
2. Many pundits claim the outperformance of Internet Stocks has led the sector to become overvalued. They cite the average P/E on the Dow Jones Internet Composite Index was 48.16, compared to 17.31 for the S&P 500 Index, according to the data.
3. The secular growth of the overall sector has contributed outsized returns as the economy has wholly reshaped itself to the transformative nature of utilizing the internet to generate revenue.
4. The data states we are at the 90th percentile of historical valuations. Continued strong earnings momentum within the sector will be the key to long-term growth and potential outperformance going forward.

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra IS or Kestra AS. The material is for informational purposes only. It represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. It is not guaranteed by Kestra IS or Kestra AS for accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Fusion Wealth Management is not affiliated with Kestra IS or Kestra AS.

Chart Source: First Trust & Bloomberg, 5/03/2018

Past performance is no guarantee of future results.

S&P 500 Index is an unmanaged group of securities considered to be representative of the stock market in general. You cannot directly invest in the index.