Market Insights

It’s hard being a stock bear now because worst-case scenarios are simply not panning out.

Take the economy. It was supposed to slow down because of trade wars and the fading “sugar high” from President Trump’s tax cuts. On Wednesday, that had Federal Reserve policymakers so worried that they swore off interest-rate increases. They also cut their 2019 growth forecast.

What happened the next day? Good news. Jobless claims fell more than expected. A survey of manufacturing in the Philadelphia area beat estimates, and leading indicators surprised to the upside.

Perhaps even more telling, semiconductors exploded higher after Micron Technology (MU) indicated a rebound in business. In some ways, chips have the same role in the modern economy that railroads did in the 19th century, or copper in China’s expansion last decade. They’re used in everything from electric toothbrushes to data centers. So, why did semiconductors close near a record high if we’re headed for a recession?

Apple and the IPOs

Other technology stocks also had good news — especially Apple (AAPL). Needham and Citi upgraded the smart-phone giant thanks to its product ecosystem and the potential for returning capital to shareholders. The iShares Software ETF (IGV) also rose into uncharted territory.

Initial public offerings (IPOs) are another big story that’s getting bigger. Levi Strauss (LEVI) priced its shares at $17, above the original $14-16 range, and spiked as high as $23.15 once trading began. Ride-sharing firm Lyft (LYFT) goes public next week, followed by larger rival Uber (UBER).

There was more: Mortgage rates fell to their lowest level in 13 months after the Fed abandoned rate hikes. That lit a fire under home builders, which have lagged the broader market.

The current pace of housing starts (about 1.2 million annually) is about half the level from 2004-2006. Meanwhile, mortgage sizes keep growing. Will supply and demand start coming together this spring? That could be another boost for growth.

In summary, you have a combination of optimism toward semiconductors. You have good-enough economic data, excitement toward IPOs and a dovish Fed. Those are pretty much the same ingredients of the mythical bull market of 1995-2000.