The Department of Commerce signed letters of intent to invest $2 billion in federal incentives under the CHIPS and Science Act across nine quantum computing and hardware companies. Rather than issuing traditional research grants, the Trump administration is taking minority equity stakes in these companies in exchange for the capital, continuing a broader policy shift toward direct government ownership in strategically critical sectors (similar to previous moves with Intel and rare-earth mining). Publicly traded quantum stocks experienced immediate and intense price surges today following the announcement (chart).
This is government-financed exuberance about the future of quantum computing. The question is whether it is rational or irrational exuberance. We are in the rational exuberance camp. Just imagine the combination of quantum computing and AI. This is all consistent with our Buzz Lightyear Theory: "To Infinity and Beyond."
Then again, exuberance may be turning a wee bit irrational. S&P 500 consensus expected long-term earnings growth (LTEG) soared to 21.9% during the week of May 21 (chart). That's the highest reading on record, except during the pandemic period.
On the other hand, our two favorite Bull-Bear Ratios remain relatively subdued, suggesting that a serious stock market pullback isn't likely for now (chart). Furthermore, our friend Michael Brush reports: "Last week, the week ending May 15, actual insiders purchased an enormous $224 million worth of stock. Granted, insider buying bounces around quite a bit week to week. But this is so high above the pre-war weekly average of $86 million, it is a meaningfully bullish signal."
The latest batch of economic indicators confirms our forecast that economic growth will improve during Q2, following weather-related lackluster growth during the previous two quarters:
(1) GDP indicators. The Citigroup Economic Surprise Index is solidly in positive territory (chart). That's because recent economic indicators have been stronger than expected.
