The number of Covid-19 infections reported in the US yesterday (April 5th) was down 5.6% from a week earlier (to 5,742). Fatalities fell 26.0%. In the UK, infections have dropped 40.7% over the past week.
It remains to be seen how far stock markets in the US can levitate higher while the rest of the world will effectively remain shut down, for possibly the rest of 2021. For sure, the successful vaccination programme has produced a spectacular re-boot for the US economy. The strength of the non-manufacturing ISM survey was not a surprise after the strong report for services in Texas last week.
IT is back in the vanguard: the modest rise in 10-year Treasury yields to date (1.73% yesterday) has failed to dampen enthusiasm for growth stocks. The Philly SOX index soared to new highs yesterday. There is a strong structural component to the rise in chip demand that transcends the pandemic.
But a word of warning: the fundamental point re-valuation, articulated in this commentary in recent weeks, cannot be ignored. Growth stocks outside of the chip sector remain vulnerable to any further upward pressure on Treasury yields. Netflix, Tesla and Deliveroo are cases in point.
Summary
- Not just pandemic-related demand
- Structural reasons for rising Philly SOX
- But ‘growth’ stocks vulnerable to rise in Treasury yields
