Chips with that, oh yes please

Whilst we wait on the minutes of the last Fed meeting and Nvidia’s results later today, there has been a general bout of profit-taking in the sector. Nvidia is down around 10% from its peak of a few days ago. In today’s investing world, it feels almost like money in tech or nothing. Buying good old-fashioned businesses that make or provide traditional services that grow in line with the world’s economy makes one feel something of a dinosaur. Where can one find the returns these tech names provide, the scalability, in such a short time? Who cares what they cost? They are the future, and that’s all that matters.  Any setback is just another opportunity to load up. This is most clearly demonstrated by the gap in performances of the tech-heavy large-cap US indexes and the boring old FTSE 100 full of booze, fags, banks and miners.

In other news, the latest attempt by the Bank of China to encourage investors to go back into Chinese stocks in a big way fell on deaf ears. The People’s Bank of China slashed the prime five-year fixed mortgage rate by 25 basis points to just below 4%. Mortgage rates have never been cut by so much before before, however, Chinese investors were left underwhelmed.  

Governor Bailey appeared yesterday in front of the Parliament treasury committee, in which, to no surprise, he was quizzed on the outlook for UK interest rates. He dangled the notion that rates could start to be cut even before they hit the 2% inflation target. This year, we have seen the 2-year gilt yield rise from below 4% to 4.55%, where it is today. The two-year gilt is the one that is most sensitive to changes in interest rate expectations. He seemed more optimistic about the UK economy despite the ONS showing that the UK economy had slipped into recession. In early March, we get what is likely to be Mr Hunt’s last budget, in which he will loosen fiscal policy. So one could get in the coming months tax cuts and interest rate cuts, which may do something to help support the economy.