The payroll report was perfect for equities: stronger than expected jobs growth and sizeable upward revisions, but still no wage inflation. The Fed may have adopted a more hawkish stance, but that hardly matters. The IT boom in the US rolls on, as confirmed by the GDP report, which showed another big rise for investment in software. The IT index for the S&P 500 is now up 36.5% for the year.
Two of the biggest gains on Friday were for semi-conductor companies: Qorvo (up 20.2%) and Skyworks Solutions (up 8.0%). Both companies will be big winners from the rapid growth in 5G next year.
The FAANGS are on the front foot too. The market capitalisation for these five companies climbed to $3.45tr on Friday, just shy of the August 30th 2018 peak.
But the spectacular rally in the S&P 500 index has been populated by a wide range of companies. There is little evidence to suggest that the concentration of power within the larger social media platforms is leading to a slowdown in investment. On the contrary, investment in intellectual property products (IPP) jumped by 6.6% q/q (annualised) in Q3 and reached a new high as a share of real GDP.
Within IPP, spending on software was up 8.2% q/q, while R&D expanded by 6.5% q/q. Both hit new records as a share of real GDP (2.40% and 2.31%, respectively).
