Looking at fed rates and employment rates back in 2019, even with a 100 bps increase in fed rates, the overall rate by the end of year is still lower than 2019.
Not to say unemployment rate now is as low as 2019…. Yeah some external factors like wars, supply chain, and Covid are still there but I feel a bit confused of what the stock market is panic for. We’re just getting back to 2019 after all. #stockmarket
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😃 -> 😥
Result of massive covid stimulus and Fed money printing. And now it’s over.
https://us.teamblind.com/s/ie3Lqfvm
(2) fed funds rate expectations are that it will surpass (a bit) the 2019 level in 2023
(3) CPI in 2019 was around 2% which is the ideal target. Given where we're at now, there are lots of other ramifications and risks of very high inflation if it doesn't come down quickly. The fed has in the past intentionally brought about a recession and they are under pressure to reinstate their credibility. In other words, there is risk the rates could go higher more and faster if inflation doesn't come down
(4) finally, unrelated to the fed, there could have just been too much enthusiasm for the growth in 2021 that resulted in high valuation for growth stocks. If those are not as sustainable, then valuations have to come down