IT stocks have had a turbulent month. They fell a further 2.8% last week and were surpassed by real estate on Friday as the best performing S&P 500 sector year-to-date (still up 17.9%). Indeed, the sell-off accelerated on Thursday, as the US Markit PMI showed a marked deceleration in both manufacturing and services activity.
In any case, it is worthwhile digging behind the main information technology index within the S&P 500 to get a clearer picture.
Shares in fintech companies were not unaffected by Thursday’s sharp sell-off. Nevertheless, finance is proving resilient. Some of the best-performing stocks in the S&P 500 IT index – and indeed the S&P 500 more broadly – have been related to payments processing and fintech.
Huge investment in cloud services has facilitated the growth of fintech. Now companies involved in payments processing are allowing SMEs, as well as larger firms, to realise significant efficiency gains.
The strong performance of companies in the business of providing technology solutions to the financial services industry also suggests that banks are aware of the need to upgrade and enhance their product offerings, for fear of getting left behind. Scale is critical in a data-driven world. The consolidation in payments processing arguably poses an even greater threat to established financial institutions.
