We have been fortunate enough to have had excellent timing with our forecasts in this space four times earlier this year and pointed that out each time. In all humility, we must point out that last week’s headline asking whether it was time for undervalued tech stocks to shine. This could not have been timed more dreadfully. Just ask owners of Google (GOOGL), a top-rated 5 (strong buy) stock at what our model told us was a reasonable valuation. It declined 11.7% last week, bringing its October price change down to -17.2%. This took its year-to-date price change all the way down to -11.2%, after it had closed September with a modestly positive year-to-date price gain. What a difference a month can make. Its report caused a chain reaction among tech stocks.
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Despite a robust Q3 (calendar-wise) earnings reporting season characterized by widespread positive surprises, technology stocks have been aggressively beaten down as investors focus heavily on soaring capital expenditure and slowing monetization timelines.The selling pressure intensified as an after-effect of the negative Wall Street reaction to Elon Musk’s high-theatrics “flying car” Tesla Roadster demonstration, which stoked broader concerns that top tech leadership is prioritizing speculative, regulatory-blocked sci-fi projects over immediate core profitability. This technical pullback in major growth companies has dragged index heavyweights like Alphabet down by double digits, forcing institutional desks to aggressively re-evaluate entry boundaries, and separate temporary valuation compression from structural weakness.
Here is an updated chart of how the market has performed quarter-to-date (just October thus far) and year-to-date in 2026.
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| Company Name | Ticker | Constant | 4th QTD Price Change | YTD Price Change | Forward P/E | Dividend Yield |
| State Street SPDR Portfolio S&P 500 ETF | SPYM | 4 | -1.08% | 10.65% | 22.3x | 1.32% |
| Invesco NASDAQ 100 ETF | QQQM | 5 | -6.95% | 12.64% | 26.5x | 0.61% |
| Vanguard Russell 2000 ETF | VTWO | 3 | 0.11% | 12.28% | 15.8x | 2.54% |
| SPDR Portfolio S&P 400 Mid Cap ETF | SPMD | 3 | 0.83% | 9.42% | 16.2x | 1.15% |
| Vanguard Morningstar Value ETF | VTV | 3 | 5.22% | 18.26% | 17.2x | 4.09% |
| Vanguard Morningstar Growth ETF | VUG | 4 | -5.73% | 4.97% | 34.7x | 0.34% |
| Schwab U.S. Dividend Equity ETF | SCHD | 2 | 9.55% | 29.03% | 16.5x | 3.42% |
| Innovator U.S. Equity Power Buffer ETF – October | BUFR | N/A | 0.20% | 6.20% | 19.8x | 0.00% |
| Vanguard FTSE All-World ex-US ETF | VEU | N/A | -2.32% | 7.87% | 13.9x | 2.85% |
| iShares Core MSCI Emerging Markets ETF | IEMG | N/A | -8.64% | 10.35% | 12.4x | 1.21% |
| SPDR Gold MiniShares Trust | GLDM | N/A | -7.00% | -10.39% | N/A | 0.00% |
| Morgan Stanley Bitcoin Trust | MSBT | N/A | -9.59% | -14.88% | N/A | 0.00% |
| iShares 20+ Year Treasury Bond ET | TLT | N/A | -5.96% | 5.31% | N/A | 3.88% |
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- The Trend: The great rotation out of premium-priced tech and into value has steadily accelerated, creating a stark performance divergence under the surface of the major averages. The October tech dive of -9.3% was a major hit on the Technology Select Sector SPDR (XLK). It entered the month as the top performing ETF year-to-date among the 11 Select Sector SPDRs sponsored by StateStreet. It has now yielded that lead to Energy (XLE), given the latter’s gain of nearly 12% for the month. XLE’s year-to-date return of 53% is now more than double XLK’s 24%.
- Relative Strength: Cyclical, high-yield, and defensive sectors—specifically Energy, Utilities, and Healthcare—continue to display prominent relative strength, pocketing significant capital inflows as investors seek immediate fundamental visibility and dividend protection.
- Seasonality: As the calendar flips to November, the probability of the market switching gears into a broad rally is historically high. November has fundamentally been one of the strongest price-change months of the year, a phenomenon that is particularly amplified during midterm election years. Historically, getting past the policy uncertainty of the early-November midterms triggers a “post-election pop” that has seen the market rise in the vast majority of midterm cycles once legislative visibility clears. We’ve checked in with Stock Trader’s Almanac CEO Jeff Hirsch, an authority in technical and calendar trading patterns. His calculations agree that November should be a very strong month for stocks. Given that, high-Beta tech stocks should do well.
Historically, Wall Street treats Washington gridlock as a net positive for risk assets. When neither party can pass sweeping regulatory overhauls, aggressive anti-trust enforcement, or major corporate tax changes, policy volatility drops. This structural stalemate eliminates macro wildcard risks, allowing institutional capital to confidently re-engage and refocus entirely on core corporate fundamentals. However, the stunning results of election night mean that this expected result will not be the case. This new information means more uncertainty regarding how investors and the markets will see the new political map with Democrat control of both House and Senate.
As pointed out last week, a market focused on corporate earnings and projected earnings growth is the environment in which the ValuEngine ranking system has truly shined historically. This is what we hope for regardless of who controls the three branches of government.
Four major tech stocks are poised to report earnings this coming week. They include:
- Advanced Micro Devices, Inc. (AMD) — Market Cap: $824.1B, VE Rating = 5
- Palantir Technologies Inc. (PLTR) — Market Cap: $442.4B, VE Rating = 5
- Arista Networks, Inc. (ANET) — Market Cap: $212.9B, VE Rating = 4 (Buy)
- QUALCOMM Incorporated (QCOM) — Market Cap: $173.1B, VE Rating = 3 (Hold).
A brief description of their positioning follows.
- AMD continues to aggressively challenge Nvidia in the enterprise AI space with its MI300 series accelerators while navigating a recovering PC client market.
- Driven by massive corporate demand for its Artificial Intelligence Platform (AIP), PLTR has effectively pivoted from its government roots to achieve explosive US commercial sector growth.
- As a premier provider of high-performance cloud networking solutions, ANET remains a critical bottleneck and beneficiary of the physical infrastructure scaling required for generative AI data centers.
- QCOM is successfully diversifying beyond its core premium smartphone chips into automotive electronics and AI-capable PCs to reduce its cyclical mobile market reliance.
The market’s reaction to AMD’s earnings should have a lot to do with the strength of AMD’s report that is expected Tuesday after the close.
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Sometimes, the plummeting of cap-weighted indexes creates an opportunity for outperformance by active managers. Thanks to ETF.com, we identified 9 actively managed technology ETFs with diversified portfolios and with no major use of derivatives. We compare these to XLK.
Here are brief, one-sentence descriptions for each of the ETFs:
- TIME (Clockwise U.S. Core Equity ETF): An actively managed growth fund that targets global secular trends by uniquely mixing mega-cap tech giants with private equity holdings and short market hedges.
- XPND (First Trust Expanded Technology ETF): An actively managed fund using a quantitative model to target long-term capital appreciation from companies in the information technology, financials, and communication sectors.
- ARKW (ARK Next Generation Technology ETF): An actively managed fund that targets companies expected to benefit from shifting bases of technology infrastructure like cloud computing, artificial intelligence, and cyber security.
- FFND (One Global ETF): A high-conviction, actively managed portfolio focused on a concentrated set of global equities best positioned to profit from changing secular growth trends.
- JTEK (JPMorgan US Tech Leaders ETF): An actively managed fund designed to capture innovative tech and tech-enabled leaders across various market caps in the U.S. equity landscape.
- IETC (iShares U.S. Tech Independence ETF): A fund that tracks an index of U.S. tech companies selected based on their focus on domestic production, localized supply chains, and technological independence.
- ARKK (ARK Innovation ETF): ARK’s flagship actively managed fund that targets cornerstone companies driving disruptive innovation across genomics, automation, energy, and shared internet technology.
- LRNZ (TrueShares Technology AI & Deep Learning ETF): A concentrated, actively managed fund that specifically targets companies heavily involved in the development and practical utilization of artificial intelligence and deep learning technologies.
- IQM (Franklin Intelligent Machines ETF): An actively managed fund that invests globally in companies positioned to profit from automated systems, robotics, and machine-learning technologies
Of these nine descriptions, one begs the question of why is it on this list? IETC follows an index. A phenomenon that happened with the SEC’s adoption of the so-called ETF rule allowed for much more latitude and delegated authority for active ETFs but still held indexed ETFs to a slightly more rigid existing standard. Subsequently, a number of indexed ETFs rebranded as active allowing for potential future changes to less than full holdings disclosure and active substitution as the portfolio manager felt necessary. Most of these rebranded indexed ETFs never used this flexibility, but since they say “active” in their prospecti, Etfdb.com classifies them as active. So, we include it in the performance table.
| Ticker | Name | VE Rating | Assets ($Mil) | 1 Month Returns | YTD Price Change | P/E Ratio | Beta | Expense Ratio |
| TIME | Clockwise Core Equity & Innovation ETF | N/A | $16 | 0.76% | 11.47% | N/A | 1.21 | 0.96% |
| XPND | First Trust Expanded Technology ETF | 4 | $39 | -0.48% | 6.71% | 36.2 | 1.26 | 0.65% |
| ARKW | ARK Next Generation Technology ETF | 3 | $1,727 | -1.01% | 6.53% | N/A | 2.00 | 0.76% |
| FFND | One Global ETF | N/A | $96 | -1.39% | 6.04% | 22.3 | 1.26 | 0.98% |
| JTEK | JPMorgan U.S. Tech Leaders ETF | 5 | $4,669 | -1.78% | 10.13% | 25.9 | 1.76 | 0.65% |
| IETC | iShares U.S. Tech Independence Focused ETF | 5 | $689 | -2.75% | 6.64% | 46.1 | 1.23 | 0.18% |
| ARKK | ARK Innovation ETF | 2 | $6,488 | -5.45% | 8.45% | N/A | 1.99 | 0.75% |
| LRNZ | TrueShares Technology, AI & Deep Learning ETF | N/A | $45 | -5.68% | 29.61% | N/A | 1.35 | 0.69% |
| IQM | Franklin Intelligent Machines ETF | 5 | $80 | -8.85% | 11.61% | 52.0 | 1.53 | 0.50% |
| XLK | Technology Select Sector SPDR | 5 | $127,300 | -9.25% | 24.40% | 34.4 | 1.34 | 0.08% |
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We draw the following conclusions:
- All nine ETFs had better returns than XLK, thus validating the premise that active portfolios can outperform cap-weighted index portfolios in a downturn.
- TIME is the only one of these ETFs that managed a positive return in a horrible month for XLK and tech stocks in general. Interested investors should be aware that TIME which also has the lowest Beta and has held up pretty well year-to-date has a tiny amount of AUM and a novice ETF provider that may or may not be able to boost that paltry number. Hopefully they can, but small accounts may encounter huge spreads they try to trade. Larger accounts should call a market maker because the underlying stocks are liquid and large trades can be executed with very little impact. Given its size, we were unable to assign a rating to TIME.
- LRNZ is the only ETF with a superior year-to-date return to XLK. TrueShares has been successful with a number of actively managed and differentiated ETFs so although AUM is still small at this stage, that could easily change quickly. If your trade is not large, investors who like the long-term perspective of the fund holdings might want to consider limit orders. We do not have a rating on it yet but its portfolio is consistent with others here we have rated either 4 or 5.
- All things considered, when one takes the expense ratio into account, none of these active funds makes a compelling case for current investors in XLK to switch. If one actually believes October was just the beginning of a bear market for mega-cap technology, there are certainly better options than an actively managed technology ETF.
On this note we return to reviewing all the StateStreet Select Sector SPDR ETFs using SPYM and SCHD for comparison. Given its disastrous week, we threw in Google just for fun.
| Select Sector / Equity Proxy | Ticker | VE Rating | 4th QTD Price Change | YTD Price Change | Forward P/E | Dividend Yield |
| Materials Select Sector | XLB | 2 | 8.65% | 14.35% | 19.5x | 1.9% |
| Communication Services Sector | XLC | 2 | -9.13% | -14.54% | 18.9x | 1.1% |
| Energy Select Sector | XLE | 5 | 11.67% | 53.38% | 12.8x | 2.2% |
| Financials Select Sector | XLF | 3 | 5.71% | 2.88% | 15.3x | 1.5% |
| Industrials Select Sector | XLI | 2 | -0.74% | 5.96% | 20.1x | 1.1% |
| Technology Select Sector | XLK | 5 | -9.25% | 24.40% | 27.8x | 0.4% |
| Consumer Staples Select Sector | XLP | 1 | 11.32% | 15.10% | 21.2x | 2.7% |
| Real Estate Select Sector | XLRE | 1 | 1.12% | 6.91% | 31.4x | 3.1% |
| Utilities Select Sector | XLU | 1 | 9.45% | 0.58% | 17.9x | 2.9% |
| Health Care Select Sector | XLV | 3 | 11.23% | 18.88% | 18.2x | 1.4% |
| Consumer Discretionary Sector | XLY | 1 | 0.06% | -2.51% | 24.6x | 0.9% |
| SPDR Portfolio S&P 500 ETF | SPYM | 4 | -1.08% | 10.65% | 22.3x | 1.3% |
| Schwab U.S. Dividend Equity ETF | SCHD | 2 | 9.55% | 29.03% | 16.5x | 3.4% |
| Alphabet Inc. Class A | GOOGL | 5 | -17.27% | -11.20% | 19.2x | 0.3% |
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Observations:
- All 11 sectors have the identical VE Rating they had last week
- Although Energy led the way, Consumer Staples and Health Care had almost equally strong price jumps.
- Energy still has the lowest forward P/E indicating that we may still not be anywhere near the end of a sector that historically runs in long cycles.
- All of the 5-ranked tech stocks we profiled last week are still ranked 5 this week. The same is true of XLK and QQQM. ValuEngine’s forecasting and valuation models consider tech as much of a strong buy as it did last week.
- Although XLY enjoyed a bit of a bounce-back week amongst the carnage, our models still find this the least attractive sector of the four we still rate with 1 (strong sell).
Herb Blank
ValuEngine Chief Market Strategist
www.ValuEngine.com (ValuEngine, Inc) is a stock valuation and forecasting service founded by Ivy League finance academics. VE utilizes the most advanced quantitative techniques and analysis available to analyze over 5,200 US stocks and 750 ETFs. Fair market valuations, forecast target prices, and buy/hold/sell recommendations are updated DAILY.
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