We are almost at the end of 2015, a year that was marked by unprecedented stock market volatility, sliding crude prices and global macroeconomic headwinds emanating from the Greek debt crisis and bursting of the Chinese equity bubble. Adding to the woes, widespread geo political instability in several regions like Syria, Yemen and Ukraine had a profound impact on the stock markets across the world.

However, amid such turbulence, the U.S. economy was relatively resilient. The Federal Reserve’s announcement of the most awaited increase in the benchmark federal funds rate after more than nine years certainly depicts how the U.S. economy has gradually gained traction since the 2008 financial crisis. The interest rate was hiked to 0.25%-0.50% from zero since Dec 2008.

The economy seems to be heading in the right direction but it isn’t completely out of the woods yet. Latest estimates from the Commerce Department point to a GDP growth rate of 2% for the third quarter as against 2.1% estimated earlier. The new estimate is way below the 3.9% growth rate achieved in the second quarter. Analysts observe that higher business and consumer spending was dragged down by inventory accumulation that marred the GDP growth rate in the third quarter. Additionally, analysts observe that the strengthening U.S. dollar, persistent weakness in China and some emerging economies, and falling commodity prices have resulted in a decline in export causing the domestic economy to shrink.

Given these multi-directional pressures, all the domestic indexes have been setting off alarm bells every now and then in what is touted to be the “crummiest year on record”.

However, investors and analysts are hoping that the Santa Clause rally might lift the stock markets before the year ends. With Christmas almost upon us, all we can do is keep our fingers crossed and hope Santa does bring the relief rally.

Tech Sector Performance

Despite the instability, the technology sector continued to be an outperformer. The S&P North American Technology Sector Index has grown 9.3% year-to-date. Analysts attribute the strong performance to the buzz surrounding cloud computing. All the sector behemoths right from Alphabet, Inc (GOOGL – Analyst Report), Amazon (AMZN – Analyst Report) to Microsoft Corporation (MSFT – Analyst Report) have been making giant strides in this arena, thereby giving a boost to the overall tech sector. Even the social media companies (especially Facebook (FB – Analyst Report) that saw a 34.1 % surge in its share price year to date) deserve credit for having put up a good show this year.

Moreover, Tech sector performed very strong in the third quarter.Based on results from 94.9% of the tech stocks (by market cap) in the S&P 500, total earnings for the sector are up 6.7% on 4.3% revenue growth, with 71.4% beating earnings per share (EPS) estimates and an above index average of 57.1% coming ahead of revenue estimates. Apple juggernaut had a profound impact on third quarter earnings. The spectacular success of iPhone 6 and iPhone 6S boosted the Cupertino based company’s earnings, adding to the tech sector’s strong run.  

However, weakness in the semiconductor space snatched some shine off the software and Internet stocks. Going in to 2016, we believe that rampant M&A in the semiconductor industry should help eliminate competition, control expenses and consolidate resources for innovation.

Moreover, the outlook for the tech sector remains bright spending on technology increases rapidly. Further, tech companies sit on a huge cash pile that should help in facilitating organic and inorganic expansion.