While the Federal Reserve has been battling inflation by lifting interest rates, its rate hike campaign could cause a recession, or at least a decline in expected economic activity and corporate earnings. Higher rates also make future profits less valuable, putting downward pressure on the multiple of near-term expected earnings that stocks trade at. If those stocks’ multiples have now “reset” lower, their prices could rise if they can keep growing their earnings stream. Read More...
While the Federal Reserve has been battling inflation by lifting interest rates, its rate hike campaign could cause a recession, or at least a decline in expected economic activity and corporate earnings. Higher rates also make future profits less valuable, putting downward pressure on the multiple of near-term expected earnings that stocks trade at. If those stocks’ multiples have now “reset” lower, their prices could rise if they can keep growing their earnings stream.
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