Jay Powell is worried about the rising Federal budget deficit. However, dire projections for the deficit have not impacted the bond market. The indexed-linked 30-year Treasury yield dropped to 0.26% on January 31st and was still languishing at 0.32% on Friday.
Low Treasury yields are providing a big lift for real estate stocks, which led the rally in the equity market last week, with a jump of 4.8%. IT still leads the rally in the S&P 500 so far this year, with a gain of 6.8%, but real estate has narrowed the gap, with a rise of 6.4%. Housing is close to overtaking IT as the critical driver for stocks.
Falling delinquencies are helping, and the latest quarterly MBA report was very positive. The mortgage delinquency rate dropped to a secular low of 3.77% in Q4
Within IT, Nvidia and AMD were the biggest winners last week: year-to-date, their share prices have jumped 23.2% and 20.6% respectively.
AMD is breathing down Nvidia’s neck, pushing aggressively into GPUs. But Nvidia is not standing still. Ultimately, 5G will increase demand for more powerful chips for video, computer vision etc. Both companies stand to gain as new, faster networks are rolled out.
• Record low arrears, rising real wages
• High-tech industries see output jump
• 5G driving software spending and share prices up
