Note the chart below from Bloomberg which illustrates the comparison of Tech Sector vs S&P 500 market capitalization and Tech vs US employment. The point I want to key in on is that recent Tech layoffs appear to be a correction of post-Pandemic over hiring, AND employment is back to the declining 20 year trend (red line).
The Tech sector is so profitable because, by its innovative nature, it’s more productive than the general economy (uses less labor). What I find most encouraging about the current market situation is that S&P 500 profit growth (including non-Tech companies) could reach 20% this year. That’s more than twice the historic average.
My assessment is that the market is not being driven higher by irrational exuberance but by profits.
Agree or disagree? Join Joe and I live on YouTube this Wednesday May 13 2pm EDT: https://www.youtube.com/live/KVO46LG8JMs
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