Big tech has delivered. Apple, Amazon, Facebook and Alphabet all announced very strong profit numbers last week. Regulatory scrutiny and the virus pandemic have failed to dent earnings. At the hearings on Capitol Hill last week (House Judiciary Antitrust Subcommittee), chief executives of US tech giants dealt adroitly with charges of ‘excess corporate power’.
Covid-19 has, of course, been an opportunity for big tech. The Trump administration’s fight with China is not unhelpful either: US technology companies are making big inroads into India, arguably the biggest (by size) growth market outside of the US and China. So far this year, the S&P 500 IT index has climbed 20.6%.
Fed chair Jay Powell showed no sign of wavering last week. Indexed-linked 10-year and 30-year Treasury yields dived to new lows (-1.00% and -0.45% respectively, see chart). Break-even inflation rates may not rise much more from here. Nevertheless, indexed-linked yields could continue to slide deeper into negative territory. That may worry some investors: but if the current trend towards lower infections of the Covid-19 virus continues, big tech will remain in the ascendency.
Summary
• Strong profit numbers spur equity rally
• Falling real yields supports equities
• Housing, communication services strong
