Falling bond yields are good for the world economy and, of course, risk assets. In the US, the S&P 500 pushed through the 2,800 – 2,815 area of resistance on Friday. The next technical target is the current all-time high of 2,929.7 (set on September 21st, 2018).
The Philly Sox index put in a very strong performance last week, rising 5.6%. That was helped by a strong showing from Broadcom, one of 19 companies in the S&P 500’s IT index that have hit new highs this year. The IT index put in a powerful performance last week (up 4.87%). Information technology is now the top performing sector within the S&P 500 (up 17.76%, year-to-date).
This should hardly come as a surprise – it mirrors the sharp rise in IT investment evident in the recent GDP numbers. IT will lead the S&P 500 to new highs. Eventually, the Fed will hike, but there is no rush. The strong showing of IT companies is the flipside of falling services inflation, and low bond yields. Core services inflation fell sharply again, in February. Spending by companies on software and R&D has helped push job openings up to record highs too. Talk of an economic slowdown is premature.
