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“Follow the Smart Money: Technology and Homebuilder Stocks Soar as Bond Yields Reverse Course

The recent dip in Bond Yields has been a cause of surprise and excitement for investors and market watchers alike. Bond yields have been trending higher since the start of 2021, leaving investors with uncertainty and fear that higher borrowing costs would end the current expansionary cycle. However, last week saw a sudden reversal of those trends, following news that the Biden administration was seeking to pass an increase in federal government spending amid the Covid-19 pandemic. This sent a signal to markets that there would be large-scale stimulus funds available to prevent the economic slide, and bond yields fell as a result. What has been the most interesting trend is that investors have not shied away from stocks in the wake of the dip in bond yields, mainly due to their faith in the perceived protection and benefits that economic stimulus could provide. Investors have instead moved towards technology and homebuilder stocks which saw sharp rebounds. The smart money has been backing technology stocks, seeing the sector as one of the primary beneficiaries of the Biden administration’s plans to dramatically expand the federal government’s footprint in the private sector, with investments in energy, infrastructure, clean technology, and other projects. Homebuilder stocks were also amongst the most loved last week, as the entrepreneurs and families behind these companies recognize the value the economic stimulus plans will have on the industry. With interest rates continuing their downward momentum and an increased rate of homebuyers entering the market, the real estate industry looks like poised to prosper in the near future. As markets continue to assess their direction in the wake of the bond yield dip, investors should pay attention to where the smart money is going. Technology and homebuilder stocks have been dominating the action and should remain attractive targets for the medium-term.