Technology vs Energy

The technology-to-energy ratio divides the total return of the US technology sector by the total return of the US energy sector. Unlike the sector-versus-market charts, it strips the broad index out entirely and pits two sectors directly against each other. The line is rebased to 100 at the start of the common history, so it measures relative performance rather than a dollar price: when it rises, a dollar in technology has compounded faster than a dollar in energy, and when it falls, energy has pulled ahead.

The technology leg captures semiconductors, software, hardware, and the large platform companies that drive the digital economy. The energy leg captures the producers, refiners, and transporters of oil and gas. This is the classic growth-versus-commodity pairing: one of the most rate-sensitive, future-oriented sectors set against one of the most inflation-sensitive, commodity-driven ones. Because they tend to thrive in opposite macro regimes, the ratio is a clean and widely watched gauge of sector rotation.

A rising line means technology is leading energy, the typical state of the world when interest rates are low or falling, inflation is subdued, and investors are paying up for growth and innovation. A falling line means energy is leading, which has historically happened when oil prices and inflation are rising and capital rotates toward real-asset, commodity-driven sectors. Long trends in either direction tend to define entire market eras.

Because both legs use total return, dividends are reinvested on both sides — a fair comparison that matters more for energy, historically a high-dividend sector, than for tech, where returns have leaned on price appreciation. The ratio therefore captures the full relative performance of the two sectors, not just their price moves.

The two sides of this ratio respond to opposite forces, which is exactly why the chart is so revealing. Technology is long-duration and rate-sensitive: much of its value sits in distant future earnings, so falling interest rates and abundant liquidity tend to lift it, while sharp tightening tends to hurt it. Energy is short-duration and commodity-driven: its profits move with the price of oil, so rising crude and rising inflation tend to lift it, while falling oil and disinflation tend to hurt it.

Put together, the ratio is largely a read on the balance between two macro themes — growth and innovation on one side, inflation and commodities on the other. When the market believes growth is scarce and rates are heading lower, tech leads. When the market is worried about inflation and rising input costs, energy leads. The ratio swings as the dominant theme shifts, which is what makes it a barometer of the broader rotation between growth and value.

The chart is defined by a handful of dramatic regime swings. Technology dominated energy into the dot-com peak around 2000, then gave that lead back through the early-2000s, when the tech bust coincided with the start of a powerful commodity bull market. Energy then surged through the mid-2000s supercycle as oil climbed toward its 2008 high, pushing the ratio sharply in energy's favor.

From the early 2010s, a long stretch of low rates, abundant shale supply that kept oil contained, and the rise of dominant tech platforms sent the ratio to new highs as technology decisively reasserted leadership. That extreme reversed violently in 2022, when surging inflation and rising oil prices powered a sharp energy rally while rate-sensitive tech de-rated. The lesson is that this is a long-cycle rotation: leadership can persist for years, reach extremes, and then reverse just as durably.

Each month the chart takes the total-return index for the US technology sector and divides it by the total-return index for the US energy sector, then rebases the resulting series to 100 at the first month both have data. Both legs use Select Sector SPDR total-return data, which begins in 1998 and sets the common start date. Reinvested dividends are included on both sides.

Two caveats apply. First, the line is a ratio of two indices, not a tradable spread, and real-world frictions like fees, taxes, and spreads are excluded. Second, both sectors are relatively concentrated — tech in a handful of mega-cap platforms, energy in a few large integrated producers — so individual company fortunes can influence the ratio more than in a broad, diversified index.

Technology vs Energy is the purest expression of the rotation that runs through several MacroRadar charts. It pairs most directly with Technology Sector vs S&P 500 and Energy Sector vs S&P 500, which show each leg measured against the broad market rather than against each other. It is also closely related to Growth vs Value, since technology anchors the growth side and energy anchors the value-and-commodity side of that divide.

For the macro forces underneath the rotation, see Stocks vs Commodities, which captures the broader growth-versus-real-asset balance, and Copper vs Gold, another growth-versus-safety gauge that often moves with the same themes. Reading these together helps confirm whether a move in tech versus energy reflects a broad regime shift or a narrower, sector-specific story.

The macro-regime panel above places the current reading in context. Because this ratio is fundamentally a contest between rate-sensitive growth and inflation-sensitive commodities, it is most informative when read alongside the prevailing inflation and financial-conditions backdrop. Low-inflation, falling-rate environments have historically coincided with tech leadership, while inflationary, rising-oil environments have coincided with energy leadership.

A ratio stretched to an extreme in either direction says one theme has been dominating the market — a pattern that has, in the past, eventually given way to a rotation back toward the other. None of this is a forecast. The purpose of overlaying the regime is to see whether today's growth-versus-commodity picture is consistent with the broader macro environment or diverging from it.

Technology and energy sit at opposite ends of the sector spectrum and tend to lead in opposite environments, which is precisely why the pairing is such a useful diversification lens. The technology-to-energy ratio is a way to sanity-check whether a portfolio is leaning heavily toward growth or toward commodities, and to read that tilt against the prevailing macro regime — extreme readings have historically marked the kind of one-sided positioning that eventually rotates.

It is not a timing signal, and MacroRadar does not present it as one. The value is context — pairing the long-run rotation picture with the current macro regime shown above helps frame whether today's environment has historically favored growth or commodity leadership. Treat it as one input into a diversified, long-horizon plan. This is a historical indicator, not investment advice.