Furthermore, fears of a recession are leading portfolio managers to rethink and shift their portfolios, where analysts now see a 60% chance of the US sinking into a recession. Meanwhile, the Founder and Portfolio Manager of the Satori Fund, Dan Niles, joined CNBC’s Squawk Box on September 26, to discuss the markets. Niles sees multiples in the tech sector as being very high and being the ‘last shoe’ to drop before markets see the real bottom.
Doling out economic pain
With the interest rate hikes, it seems as if the Fed is doling out economic pain, but on the other hand, throughout history, raising rates was a way to fight inflation while simultaneously slowing economic growth. Moreover, when interest rates rise, market participants should increase the discount rate they use to determine the value of future cash flows or interest payments tied to a risk asset, such as stocks or bonds. While high rates and high inflation pressure future earnings, lower valuation has to be given to such assets. While inflation has dropped compared to the 40-year highs seen over the summer, it seems more pain has to be dished out before a ‘recovery’ can be had. For investors currently not in the markets, analysts so far seem to suggest a period of waiting. Buy stocks now with Interactive Brokers – the most advanced investment platform Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
