Interest rates are moving up, and equity investors are responding in a predictable way by selling highly valued stocks and buying “cheaper” stocks instead. This pattern was seen in many prior episodes of monetary tightening and/or economic slowdown. I expect that investors will be biased towards inexpensive stocks until they see that the rates are peaking. This can take a few quarters because even if the war in Ukraine stops immediately, the reallocation of commodity trade flows will take time, keeping prices of commodities, transportation services, energy, and food at elevated levels. Should Central Banks continue to rise interest rates to fight inflation, the Global economy may slow down materially. It is interesting to note, that year-to-day the Euro has depreciated against USD by 8%, making oil, which is priced in USD, more expensive in Europe.
Outlook: interest rates keep going up…
Outlook: interest rates keep going up…
Outlook: interest rates keep going up…
Interest rates are moving up, and equity investors are responding in a predictable way by selling highly valued stocks and buying “cheaper” stocks instead. This pattern was seen in many prior episodes of monetary tightening and/or economic slowdown. I expect that investors will be biased towards inexpensive stocks until they see that the rates are peaking. This can take a few quarters because even if the war in Ukraine stops immediately, the reallocation of commodity trade flows will take time, keeping prices of commodities, transportation services, energy, and food at elevated levels. Should Central Banks continue to rise interest rates to fight inflation, the Global economy may slow down materially. It is interesting to note, that year-to-day the Euro has depreciated against USD by 8%, making oil, which is priced in USD, more expensive in Europe.