Brian Belski, Merrill Lynch's U.S. sector strategist, says tech is now in the pole position among market sectors as share prices roar back—even though he says most clients aren't paying much attention to the surge.
His historical research says the second half is traditionally the best time to own tech, and that more stable earnings growth could continue to propel double-digit gains over the next 4-6 quarters. That includes most bits of the market, including software firms offering growth at a reasonable price, a semiconductor sector "prime for recovery," and computer sales that mark "one of the few industries exhibiting sequential growth over the past few quarters."
The fuel for that growth is hopes for continued strength in business investment, which has held up relatively well despite the slowing economy. International demand is driving tech gains too, he says. Tech is also one of a limited number of upbeat sector choices. Belski says it's too late for energy (the best-performing sector now) and too soon for financials (where economic and credit woes are still having an impact).
Short interest in big tech names has been falling steadily according to Nasdaq data, including for bellwethers like Cisco, Microsoft, Apple, and Intel.