Investors Weigh In: Will Tech Stocks Deliver Big Returns Over the Next 5 Years?

Tech stocks have delivered for investors in a big way in 2020. But it’s not justa one-year blip on the radar: The tech industry has deep roots in just about every other sector now. As a result, tech stocks have delivered market-crushing returns for many years now. For example, the Technology Select Sector SPDR ETF (NYSEMKT:XLK) and tech-heavy NASDAQ-100 index have returned almost 500% over the past decade, versus 272% for the S&P 500 index. 

But with valuations stretched, can investors continue to expect tech to deliver? Host Jason Hall recently put that question to Motley Fool Contributors Danny Vena and Daniel Sparks on the Oct. 29 edition of “The Wrap” on Motley Fool Live. Watch the video below to see what they had to say about tech’s prospects in the years ahead. 

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Transcript:

Jason Hall: Over the past decade, whether you look at one-year, three-year, five-year, 10-year period, the tech sector has been the best sector to invest in. Here’s a question. Danny Vena, over the next five years, will tech stocks outperform or underperform the broader stock market?

Danny Vena: Tech is going to crush it. If you look at the momentum, if you look at what’s going on here, and I’ll do this in 30 seconds, cloud computing, gaming, streaming video, software as a service, all of the major trends that are going on right now all in technology.

Jason Hall: No doubt about it. Daniel Sparks, what do you say?

Daniel Sparks: I’ll go with tech as well. I just say that, primarily, I think that during this time, we’ve seen how bad it can be for a business if you’re not prepared technology-wise, if you don’t have the digital systems in place. So that’s my look. I think the investors are going to be not as forgiving going forward about digital strategies. I think that there’s continued to be a high appetite for companies that are doing that well. But my caveat on that is that it doesn’t necessarily have to be a technology company. I think companies that are doing technology well, that might not necessarily be in the technology space. So it doesn’t necessarily answer the question. But I would say companies doing well in technology, I think, will be outperformers over the next five years. Just my shoot form the hip guess there.

Jason Hall: I think you’re right. I read it somewhere. Somebody’s much smarter than me said it, I’m not sure who was. But every successful company going forward is going to be a technology company. You have to. I don’t care if you’re making steel, you’re building cars, you’re running a restaurant. If you’re not good at technology, there’s somebody that’s going to leverage technology that’s going to eat your lunch. Yeah, I absolutely agree. 

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