Sunday, December 2, 2012

The ISI Tech Survey weakness is yet to be reflected in the market

The ISI Tech Company Index (see discussion) shows continuing weakness. The survey, which is heavily weighted towards US semiconductor firms, is now at the lows of 2008/09. It seems that firms have been postponing spending on equipment and to a lesser degree on software. The obvious explanation is the uncertainty in Washington.

Source: ISI Group

So far this weakness has not been reflected in the equity markets. The PHLX Semiconductor (SOX) index is definitely off the highs but is still up for the year. At some point (probably within the next couple of months), either the sentiment in the industry will begin improving or we will see a selloff in the tech sector. Companies manufacturing and servicing business tech equipment (as opposed to retail) are particularly vulnerable.

SOX Index (Yahoo finance)
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