People are calling this a correction... I don't understand the first thing about economics. Over the last quarter, the Nasdaq is down 25%. That's a correction? Seems pretty serious
The difference between then and now is that interest rates are blasting through the roof along with inflation. The underlying question that CEO's need to think through is whether this is a long-term shift in the funding environment, or a short-term blip. If the latter, actually taking the foot off the gas instead of saying that you will could lead to missed growth relative to competitors.
Now, in the event that its a long-term shift - there will certainly be firms who run into the wall from not taking their foot off the gas.
The effective federal interest rate is 0.33% today. It was 2.4% before COVID...
I believe it is actually over double that and sits around 0.84
If valuations rose because interest rates fell, then rising interest rates will do the opposite
the next 2 meetings they plan to raise it by 0.5 each meeting. and then 0.25 each meeting after that until inflation is gone.
in 2019 they started lowering it because they crashed the market by raising it to 2.5. which proves the point
trajectory matters alot.
Without real growth, we cannot have wage increases and asset price increases - one must take from the other. So far the fed has chosen asset appreciation over wage increases, we’ll see how things play out this cycle.