After an impressive run-up, semi-conductor stocks endured a modest correction last week, with the Philly Sox index slipping 2.9%. The ‘reflation’ story shifted to real estate and, in particular, housing. Building permits, mortgage applications and the median price for existing homes all rose strongly last week. According to the MBA, new home sales are “on a roll”.
After such a big jump in 2019 (up 39.4% year-to-date), it is hard to imagine that the IT sector will again outperform the S&P 500 in 2020. It is possible, but equally, the focus may switch to sectors that will benefit from current innovations (IoT, 5G, VR etc).
There are numerous possibilities: industrials may perform well, as manufacturers embrace the opportunities to cut costs and seek new markets. But there will be losers too, as the shift to renewables and EVs (or other hybrids) accelerates.
Retailers may benefit as 5G transforms ‘the shopping experience’. Healthcare could be a major winner too, although China could be a competitor in pharmaceuticals. Start-ups are starting to proliferate in education.
