Tech’s rising influence on 401(k) plans

Tech stocks are back in rally mode, and that means 401(k) portfolios of most Americans are loaded with more tech shares such as Apple, Facebook and Netflix than they might realize.

Thanks to a recent surge to fresh highs, the information technology sector now accounts for 26.2% of the S&P

500 stock index — the biggest tech weighting since November 2000, according to Bespoke Investment Group. And tech domination is likely to become even more pronounced Thursday when social media platform Twitter is added to the large-company index.

Big helpings of tech stocks are a double-edged sword. Like now, when tech is leading the market higher, it means

401(k) investors who own shares of “index” mutual funds or exchange-traded funds that track the S&P 500 will see bigger gains. Tech is getting a lift from Apple, the world’s most valuable company, which is trading at record highs.

The flip side, of course, is if tech stocks stumble. In that case, any tech downdraft will have a disproportionately large negative impact on 401(k) plans.

Working in tech stocks’ favor now is strong earnings. Tech profit growth outpaced the broad market by nearly 10 percentage points in the first quarter, and analysts expect tech earnings to top the market again this quarter, according to Thomson Reuters.

Tech stocks also are benefiting from uncertainty in foreign markets such as Europe, which has resulted in more overseas money flowing into U.S. assets. “Tech leadership remains intact,” Robert Sluymer at New York-based Fund Strat Global Advisors notes.