What's Fueling the Tech Rally? Car Sales Are Down, May Jobs Report, Return on Homeownership & More

Where is the money coming from that is fueling this technology rally? 

No one knows for certain, but there are some concerning signs that suggest many investors may not have the cash to support their positions and are instead relying on borrowed money to drive the rally higher. One metric we continue to monitor closely is margin debt, a potentially dangerous tool that has now reached record levels. 

Margin debt hit a record $1.304 trillion in April, an increase of 6.8% from the previous month. On a year-over-year basis, margin debt surged 53.3%, highlighting the growing use of leverage in the market. Looking at US margin debt as a percent of real GDP, it just hit 5.2%. According to FINRA data that is an all-time high and during the dot-com era it was around 2% - 3%. 

The risk with margin debt is that when stock prices decline, investors may receive a margin call requiring them to deposit additional funds into their accounts. If they are unable to meet that requirement, their broker can automatically liquidate positions to cover the shortfall. While margin rules vary based on several factors, you could be in hot water if your equity drops more than 25%. 

With margin debt at such elevated levels, even a modest setback in the semiconductor or broader technology sector could trigger a chain reaction of forced selling as investors scramble to meet margin calls. Some investors may choose to exit positions before receiving a margin call, particularly if they become uncomfortable with the amount of leverage they have assumed. In those situations, emotions can accelerate selling pressure and amplify market volatility. 

Technology and semiconductor stocks are already trading at elevated valuations. Adding substantial amounts of borrowed money to an already expensive market increases the risks and leaves investors vulnerable if market sentiment shifts. 

Car Sales Are Down, and I Think That's a Good Thing 

In 2019, consumers in the United States were buying roughly 17 million cars and trucks each year. This year, vehicle sales are expected to reach only about 16 million. Many consumers complain that new-car prices are simply too high, with the average new vehicle now costing around $50,000. Currently, only about 25% of new vehicles sold in the U.S. are priced between $25,000 and $35,000. 

I believe this trend is actually a positive development. For too many years, automakers focused on producing as many vehicles as possible in an effort to gain market share. In the long run, this proved to be a poor business strategy. Over the years, several manufacturers required government bailouts, while others filed for bankruptcy, hurting shareholders, creditors, employees, and communities. 

Of course, consumers benefited from this excess production. They could often find heavily discounted vehicles, generous incentives, and large rebates. However, those deals were frequently the result of an unsustainable business model. 

Today, automakers, led by executives such as Mary Barra of General Motors, have adopted a different approach. Rather than producing excess inventory simply to increase market share, they are focusing on profitability and financial discipline. What a novel idea for a business. Ultimately, making a profit is the primary objective of any business. 

Consumers have already begun adapting to higher vehicle costs. The average age of cars on U.S. roads has climbed to 13 years, up from less than six years in 1970, reflecting a growing tendency to hold onto vehicles longer. As a result, many consumers may need to take better care of their cars and keep them in service for more years, a choice that is often financially prudent anyway. Others may increasingly turn to high-quality used vehicles rather than purchasing new ones. 

The industry's renewed commitment to profitability has also made some automakers more attractive investments. Strong cash flow, healthier balance sheets, and improved earnings have created value for shareholders while helping companies avoid the financial distress that plagued the industry in the past. 

I do not expect this trend to change anytime soon, and in my view, that is a good thing. 

The May jobs report delivered another reminder that the U.S. economy remains on solid footing 

Employers added 172,000 jobs in May, well above expectations of 80,000, and the broader trend is becoming increasingly encouraging. Over the last three months, job growth has seen gains of 214k, 179k, and now 172k in May, an improvement from the pace we’ve seen really since the beginning of 2025. Rather than slowing, the labor market appears to be finding a sustainable rhythm that balances continued hiring with moderating inflation pressures. 

One of the most notable areas of strength continues to be hospitality and leisure. The sector added 70k jobs in May, reflecting resilient consumer spending on travel, restaurants, entertainment, and experiences. Despite concerns that higher interest rates would weigh heavily on discretionary spending, Americans continue to spend on services, supporting employment growth across hotels, restaurants, and tourism-related businesses. 

Perhaps the most important takeaway for investors and policymakers is what we're seeing in wages. Average hourly earnings rose 0.3% in May and are up 3.4% over the past year. That may be close to the sweet spot for the economy. 

Wage growth is strong enough to support rising household incomes and consumer spending, but not so strong that it creates significant inflationary pressure. For much of the post-pandemic period, policymakers worried that rapid wage gains could fuel a wage-price spiral. Today's data suggests something different: workers are still seeing real income growth while wage inflation has moderated to a level more consistent with long-term price stability. 

Taken together, the report paints a picture of an economy that remains healthy. Hiring is outperforming expectations, hospitality demand remains robust, unemployment remains low, and wage growth is providing support to consumers without reigniting inflation concerns. 

That's about as close to a "soft landing" as policymakers could have hoped for a year ago. 

Financial Planning: Return on Homeownership 

Homeownership is often viewed as a superior financial decision, while renting is frequently considered "throwing money away." However, the comparison is more nuanced. A $1 million home in San Diego may rent for approximately $4,000 per month, while owning that same home could cost about $7,000 per month after a $200,000 down payment when the mortgage, property taxes, insurance, and maintenance are included. Even after accounting for estimated tax benefits of $1,000 per month and approximately $750 per month of equity from the principal reduction of the mortgage, the effective cost of ownership would still be about $5,250 per month.  

In addition, the down payment represents capital that could otherwise be invested and generate returns. When the higher cost of ownership and the opportunity cost of the down payment are considered together, the home would need to appreciate by about 3.5% annually just to produce the same financial outcome as renting and investing the difference.  

While homeownership offers benefits such as stability, control, and a fixed payment, future home price growth is likely to be much more modest than it was during the low-interest-rate environment of the past decade with many experts projecting between 2% and 3% per year. As a result, neither renting nor owning is inherently the better financial choice. Both can be effective strategies depending on an individual's goals, time horizon, lifestyle preferences, and overall financial circumstances. 

Bourbon Sales Continue to Slow

Bourbon sales continue to decline as more Americans monitor their alcohol consumption while also facing inflation, tariffs, and the growing popularity of weight-loss drugs. Kentucky, which produces approximately 95% of the world's bourbon, currently has an inventory of 16.1 million barrels. This is equivalent to roughly 300 million cases. At current consumption levels, that supply could last about 10 years. 

Bourbon consumption has fallen from its peak in 2022, when sales reached 31.2 million nine-liter cases, to approximately 30 million nine-liter cases in 2025. To be fair, this decline comes after a remarkable boom that began around 2010, when the bourbon craze took off and classic cocktails such as the Old-Fashioned regained popularity. 

The industry is beginning to feel the impact. Brown-Forman, best known for Jack Daniel's Tennessee Whiskey and a company whose roots date back to 1870, is laying off approximately 12% of its 5,400-person workforce. These challenges appear to represent one of the most difficult periods for the industry since the years following Prohibition, when the U.S. government banned the production and sale of alcoholic beverages. 

In an effort to adapt to changing consumer preferences, Jim Beam is experimenting with a nonalcoholic citrus cocktail. This marks the first time since Prohibition that the company has produced a nonalcoholic beverage. In my professional opinion, I do not believe this strategy will have a significant impact due to the intense competition in the nonalcoholic beverage market, which already includes a wide variety of soft drinks, energy drinks, and alcohol-free alternatives. I do not believe alcohol sales will ever disappear entirely; however, I think the industry's peak sales years are likely behind it. As a result, producers will need to adjust expectations, improve efficiency, and learn to operate profitably in an environment with lower overall sales. 

Credit Card Debt Continues to Worsen for Some Americans 

Credit card debt continues to rise for many Americans. Total U.S. credit card debt has reached approximately $1.25 trillion. The growing divide in the economy, often referred to as the "K-shaped economy," is contributing to this trend. Higher-income consumers continue to spend freely, while lower-income households are facing increasing financial pressure. 

In the first quarter of 2026, credit card balances that were 90 days or more delinquent rose to 13.12%, the highest level in 15 years and the worst delinquency rate since the Great Recession of 2008. Just one year earlier, in the first quarter of 2025, total U.S. credit card debt stood at $1.18 trillion. While the increase of roughly 6% may appear modest, the overall trend remains concerning. 

Part of the strain comes from rising interest rates. The average credit card interest rate is now approximately 21%, up significantly from 14.6% in February 2022. The average American carries about $6,600 in credit card debt. As food, housing, and energy costs continue to rise, many families earning less than $90,000 per year are struggling to make ends meet and are increasingly relying on credit cards to cover everyday expenses. 

There are several steps consumers can take to reduce their credit card debt. First, consider negotiating a lower interest rate with your credit card company, transferring balances to a lower-rate card, or consolidating debt with a personal loan that carries a lower interest rate. Second, focus on paying down the credit card with the highest interest rate while continuing to make minimum payments on all other accounts. This strategy can save a significant amount in interest costs over time. 

Finally, create a realistic budget and commit to following it. Consider limiting yourself to one credit card and paying that balance in full each month. Ideally, use a cash-rewards card so you can earn cash back on purchases while avoiding costly interest charges. 

Taking these steps can help consumers regain control of their finances and reduce the burden of high-interest credit card debt. 

The latest job openings data is another reminder that the U.S. labor market is cooling, not collapsing.

Job openings jumped to 7.6 million in April, the highest level in two years and far above expectations. While hiring remains subdued and workers are still cautious about switching jobs, the broader picture is one of resilience rather than recession. Job openings rose by 731,000 from March, which was the largest monthly increase since 2021. This increase also put the available jobs above the total number of unemployed workers. 

Yes, there are caveats. Hiring fell to 5.1 million, which was a decline of 419,000 from March, and the quits rate slipped to 1.9%, suggesting workers aren't feeling confident enough to leave their current jobs. Total quits declined to under 3 million, which was down 183,000 and the lowest level since August 2020. Employers are still operating in a "slow hire, slow fire" environment. 

But the key takeaway is that demand for labor remains intact. Layoffs remain low, unemployment is holding near 4.3%, and there are once again more job openings than unemployed workers. 

For months, many feared that higher interest rates, trade uncertainty, and geopolitical tensions would push the labor market into a sharper downturn. Instead, the data continue to point toward a gradual normalization. Hiring isn't booming, but companies are still looking for workers, and widespread job losses haven't materialized. 

The labor market may not be hot anymore, but it still looks alright. 

The Equity Risk Premium Looks Concerning 

The equity risk premium is another indicator suggesting that the stock market may be expensive. The equity risk premium measures the gap between the S&P 500 earnings yield or the profits companies generate relative to their market valuations and the yield on the 10-year Treasury. When expressed as a percentage, it reflects the additional return investors receive for taking on the risk of owning stocks instead of holding government bonds. 

With the 10-year Treasury yield currently around 4.5%, the equity risk premium is hovering near zero and occasionally turns negative. The last time this occurred was during the dot-com bubble, when the premium remained negative for an extended period. 

For this indicator to improve, we would need to see lower long-term interest rates, higher corporate earnings, lower stock valuations, or a combination of all three. Given the persistent demand for long-term debt financing and ongoing fiscal deficits, I do not expect long-term rates to decline significantly anytime soon. At the same time, corporate earnings already appear to be priced for near-perfect outcomes. 

It is also important to recognize how concentrated the market has become. Roughly half of recent market growth has been driven by technology companies. Because many of these firms trade at elevated valuations, a broader market pullback remains a possibility. However, lower price-to-earnings stocks that generate strong dividend income could potentially outperform and even rally if investors rotate away from high-growth technology names. 

The market is sending a message that many investors don't want to hear: risk is rising, even as the headlines remain overwhelmingly bullish. 

Yes, earnings have been phenomenal. S&P 500 profits are now expected to grow more than 22% this year, fueled largely by AI infrastructure spending and cloud adoption. That's a genuinely rare level of earnings acceleration. 

But history suggests that when earnings growth exceeds 20%, future stock returns often disappoint. Over the last 100 years, periods with profit growth above 20% produced annualized S&P 500 returns of just 2%, largely because investors begin questioning whether such extraordinary growth can be sustained. 

At the same time, technical conditions are reaching extremes rarely seen outside major market peaks. The S&P 500 Technology sector was on track for its best 10-week rally ever, up 44.6%. The sector is now trading with an RSI above 80 and sits 28% above its 200-day moving average. This combination has occurred only 10 times since 1990, and most instances were followed by meaningful consolidations or drawdowns. 

Even more concerning is what's happening beneath the surface. The Philadelphia Semiconductor Index surged 69% in just two months. The only other time semiconductors gained more than 60% over a two-month period was during the final blow-off phase of the dot-com bubble in early 2000. 

There's also a fundamental issue that few investors are discussing. Corporate after-tax profits as a percentage of GDP are already near record highs, while labor's share of GDP has been pressured relative to historical norms. In other words, corporate America is already capturing an unusually large portion of the economic pie. For earnings to continue growing far faster than the broader economy over multiple years, profit margins would likely need to remain at or above levels that are already historically extreme. 

That is a difficult assumption to make. Competition, wage pressures, regulation, taxation, and the normal forces of capitalism tend to pull excess profitability back toward more sustainable levels over time. Record profit margins often look permanent at the peak, but they generally revert back to the mean. The higher margins rise above long-term norms, the more vulnerable they become to disappointment. 

This doesn't mean a crash is imminent. Markets can remain overbought longer than many expect. Strong momentum can persist, and exceptional companies can continue delivering exceptional results. 

But investors should recognize the difference between a healthy bull market and one increasingly dependent on perfect outcomes. Earnings growth is already extraordinary. Valuations remain elevated. AI spending is unprecedented. Corporate profits are capturing a record share of the economy. Expectations have become enormous. 

The biggest risk today isn't weak business fundamentals. It's that fundamentals have become so good that investors are assuming they'll stay that way indefinitely. When expectations reach extremes, even great news can become fully priced in. History shows that markets are often most vulnerable not when the outlook is poor, but when optimism becomes nearly universal and perfection is expected. That's what makes this environment look increasingly risky. 

Will Stablecoins Cause Economic Problems? 

With nearly $300 billion in stablecoins, weaknesses in how they operate could potentially create economic disruptions. Supporters of stablecoins argue that this cannot happen because stablecoins are backed by U.S. Treasury bills and other highly liquid assets. The recently passed GENIUS Act requires stablecoins issued in the United States to be backed by safe, liquid assets such as Treasury bills and bank deposits. However, that does not make them completely risk-free. 

Federal Reserve Governor Michael Barr has pointed to potential loopholes in the GENIUS Act. He noted that some of the bank deposits used to back stablecoins may be uninsured. In addition, the law allows stablecoin issuers to obtain funding through repo loans, including transactions involving foreign entities. That could include Bitcoin, which El Salvador recognizes as money. Critics argue that this could introduce additional risks into the system. 

History provides examples of how seemingly safe financial products can experience sudden stress. During the 2008 financial crisis, the Reserve Primary Fund, a money market fund with approximately $62 billion in assets, "broke the buck" and fell to $0.97 per share. This triggered widespread concern and led investors to withdraw money not only from that fund but from other money market funds as well. The episode demonstrated how quickly confidence can evaporate when investors begin to question the safety of an asset. 

Another concern is that stablecoins operate across a fragmented and often proprietary infrastructure. Unlike traditional bank deposits, there is no single institution or government agency standing behind the entire stablecoin ecosystem. As a result, problems at one issuer or within one part of the system could potentially spread through the broader market. 

The United States has experienced a similar situation before. Between 1837 and 1863, banks were permitted to issue their own currencies. This private banking system was often plagued by inefficiencies, inconsistent standards, and widespread fraud. Over time, confidence in privately issued currencies declined, and some banks refused to accept notes issued by other banks. Eventually, the system deteriorated and was replaced by a more standardized national currency framework. 

The term "stablecoin" may give people a sense of security, but the name itself does not eliminate risk. When examining what backs these assets and how the broader system functions, it becomes clear that stablecoins may not be as safe or as stable as their name suggests.