Use it or lose it

Nvidia, post the results was probably the least exciting thing that happened to technology shares yesterday as the news that the US Department of Justice plans to force Alphabet to sell its Chrome browser to dismantle its monopoly of the browser market sent the shares lower and seemed to have a knock-on effect onto the rest of the sector. The tech sector was one of the weaker performers yesterday as the S&P 500 continues to make further gains.

A few weeks ago, I took the liberty of referring to a BCA lunch I recently attended with the highly regarded Peter Berenzin, BCA’s Chief Global Strategist, explaining his views on current stock markets. He refers to the high valuations US stocks currently enjoy and whether that is sustainable. Probably not, but the point is not that to my mind. The problem is high valuations are sustainable while the economy is expected to grow. Future returns may be lower, but they are likely to remain positive. The problem comes when the economy stalls, and then one gets the geared effect of a de-rating alongside a fall in earnings. Not owning US stocks as they looked expensive has been an error, in hindsight, over the past few years. What is the greater error is not being prepared when the next correction comes; remember that history shows us this is the opportunity to prepare for the next bull market, and we will need courage as it will feel like the worst thing to do. It could be tomorrow, next week or a year away. According to Mr Berezin’s latest report on his travels, investors are happy to stay on board the equity rally for now, anyway.

As poor old Ms Reeves remains under the spotlight for more than one reason. So far, since she took the keys of No11, her budget has been widely criticised, growth has slowed, inflation has picked up, and yesterday, public borrowing came in higher than expected. Later today, we will get the results of the S&P flash purchasing manager surveys, which are considered a window into the economic outlook. Before then, the latest retail sales data showed an uptick ahead of consensus. The old adage use it or lose it comes to mind