Technology stocks have been performing extremely well in recent years. According to J.P. Morgan, the technology sector has gone up by 130% over the last 5 years. However, this growth might no longer last for multiple reasons. First of all, the U.S. tech stocks has seen similar returns that rival the dot-com run up, indicating that there might be a bubble. With GDP growth slowing down, valuations may no longer be attractive. Secondly, the reputation of some tech giants like Facebook and Tesla have currently taken a hit. Thirdly, the trade tariffs that the U.S. has imposed on Chinese goods may trigger retaliation and hurt the U.S. tech stocks and U.S. chip makers. Finally, the European Commission has proposed an additional tax at 3% of revenue from some digital activities offered by companies whose annual global revenue exceeds €750 million, significantly shrinking profits of Facebook, Amazon and Google. The investment recommendation is therefore to make a tactical move out of tech (XLK).  The arguments for this conclusion are elaborated on below.


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