Animal spirits are driving momentum across the economy, especially in capital markets. There’s hundreds of billions of dollars waiting to be invested via vehicles like SPACs. Valuations are extreme, yet they are justified by low interest rates. Meanwhile demand is exceeding supply in industries like semi-conductors, housing and transport. Companies are citing inflationary pressures. But the Fed and Treasury are united behind continued stimulus. “We have the tools to deal with that risk.”
Succinct Summary: There were a lot of major data points about the economy last week but the biggest news of all seemed to be just how well tech companies did despite the massive economic dislocation. In a quarter where GDP fell at a 33% annualized rate, Apple managed to grow revenue by 11%! Stimulus probably played some role in tech companies’ strong performance, but beyond the stimulus is the fact that COVID has pushed everyone to spend even more time at home and on the internet. The behavioral shifts appear to be long-lasting too. 20 years after the dot com bubble, the internet is still not done reshaping society.
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