What Happens When the Tech Rally Ends?

Many investors may be concerned about what happens after the tech rally ends.

A key characteristic of this month has been the rotation out of tech stocks and the surging interest in small-cap stocks. With tech stocks making up a substantial portion of broad market indexes, investors may wonder what the end of a tech rally means for the market.

There are two options for how the market will handle the end of the tech rally, according to Natixis Investment Managers. Investors will either rotate to other segments of the market or sell and move to the sidelines in cash.

“We believe rotating into other sectors of the market would be a positive for the broader markets,” Natixis wrote. “Breadth would widen out and support a broad-based rally.”

Due to tech’s significant weight, the headline index level may decline. However, other segments of the market will still offer gains, according to the ETF issuer. This might include value, cyclicals, and equal-weight indexes.