In its latest Sector Strategy report,Bank Sarasin said that with technology stocks currently underrepresented in portfolios, investors are likely to increase positions in IT shares, which should boost the sector. Consequently the bank recommended an overweight position for the IT sector.

With more than 83 per cent of the stock market capitalisation of the IT sector in the US, a bet on this sector is comparable to a general bet on the US economy, the report said. The steep price fall in recent months has been due to the uncertainty surrounding the US "fiscal cliff".

"With uncertainty regarding the US fiscal cliff already priced in, we expect IT shares to benefit in the short-term from product launches and less market insecurity. In the long-term, the sector will benefit from cloud computing and the mobile internet, so we are recommending an overweight position,” Gabriel Bartholdi, strategist, Bank Sarasin, said.

In addition to the ISM Index, subsectors such as semiconductors reliably signal changing trends since they are at the start of the technology value chain and are often the first to register an increase in sales. The best index for tracking semiconductors is the Philadelphia Semiconductor Index. The SOX, which signalled the November fall in the ISM, has now rebounded, which is a positive sign, according to Sarasin.

The sharp price falls in the IT sector are reflected in the positioning of portfolio and fund managers. Given the already cautious positioning, there is only minimal danger of further setbacks. With economic uncertainty reduced, investors are likely to build up positions in the sector again, which should give technology stocks a boost, said the report.

The IT sector will also benefit from structural trends in the mid- to long-term. Both cloud computing and the mobile internet create excellent growth opportunities. Given the opportunities, and the quality of companies in the sector, investors should overweight the IT sector in their portfolios.