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A worrisome shift in tech stock drivers

Writer's picture: Joseph MezrichJoseph Mezrich

A distinction of tech companies is that they are sources of innovation and growth. In addition, large-cap tech companies often rank among the highest quality in the market when evaluated by typical measures such as Return on Equity (ROE). That is why the tech weight in the quality ETF QUAL has grown to 43%. Furthermore, ROE has been the most effective driver of long-short stock returns within the tech sector of the S&P500, more than momentum or size.

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